Success is an attitude
Get ready for retirement!
Presenter Name
Title
June 7, 2007
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Please read
Lincoln Financial Distributors, Inc. presents this seminar
for educational and informational purposes only. We have
made every effort to ensure its accuracy. It is presented
with the understanding that we are not engaged in
rendering legal or tax advice.
While this seminar discusses general tax aspects and
investment concepts, we make no representation as to
suitability for individual clients. Interested parties should
seek their own tax and legal advice before implementing a
plan of the type described in this presentation.
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The new retirement
Growing old is no more than a bad habit which a busy man
has no time to form.
— André Maurois
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
What would you like to get out of today’s program?
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Agenda
The transformation of retirement
Introduction
Transformation of
retirement
Retirement challenges
The five challenges
Solutions
Conclusion
Solutions to the revolution
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The retirement generation gap
Longer retirement
Introduction
• In 1950, retirement started later and ended earlier
Transformation of
retirement
Retirement challenges
than it does now.
Solutions
• Today, retirement is lasting 20, 30, even 40 years!
Conclusion
Chances of a 65-year-old living to age 90
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The retirement generation gap
Healthier, more active lifestyles
• More flexibility
• Greater control
• Lifetime income
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The retirement generation gap
Decline of traditional retirement income sources
• Social Security
• Corporate pensions
• Medicare
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The retirement generation gap
Portfolio management structuring
Introduction
• In the past, income management was sufficient.
• Now we need continued accumulation and
protection of retirement assets.
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Retirement challenges are a-changin’, too
Greater freedom in retirement requires:
• Greater stability of income
• Control
• Flexibility
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The face of retirement challenges
1
Changing sources of income
Introduction
Transformation of
retirement
Where will all your income come from?
Retirement challenges
Solutions
Where will all your income come from?
Conclusion
Social Security
Earnings
20.7%
37.6%
Asset income
19.9%
Employer
benefits
18.7%
3.1%
Other
Data source:
U.S. Bureau of
Labor Statistics, 5/07
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The five retirement challenges
2
Your income must last your lifetime
Introduction
Transformation of
retirement
Chances of your income lasting throughout a 25-year retirement
Retirement challenges
Solutions
Conclusion
Simulation estimates the range
of possible outcomes by using
the historical 1926–2004 annual
average return and standard
deviation figures for the asset
classes and inflation.
These projections do not take
into account other variables such
as fluctuating principal and
changing tax consequences. No
assurance can be given that the
assumptions will prove to be
correct, and the difference
between assumptions and actual
results could vary materially.
Indexes used: Stocks, S&P 500
Index; Bonds, 5-year U.S.
Government Bond Index.
Government bonds are
guaranteed by the full faith and
credit of the United States
government as to the timely
payment of principal and
interest, while returns and
principal invested in stocks are
not guaranteed. The above
indexes are unmanaged and
unavailable for direct investment.
Index past performance cannot
guarantee future returns.
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The five retirement challenges
3
Maintaining your standard of living
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Cost of inflation
Conclusion
Expense
Time period
Avg. annual
inflation rate
Hotel stay
1976–2006
6.38%
$0.28
Dining out
1965–2006
4.90%
$0.16
Admissions to movies,
theater, concerts, and
sporting events
1978–2006
5.07%
$0.32
Source: U.S. Dept. of Labor Statistics, 2007
Most recent data available
$1 equals
(2003)
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The five retirement challenges
4
Managing market volatility
Introduction
Transformation of
retirement
Retirement challenges
Positive and negative years of the S&P 500 Index (1926–2006)
Solutions
Conclusion
80
Positive 71.6%
60
40
20
0
-20
-40
Negative 28.4%
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
The five retirement challenges
5
Rising healthcare costs
Introduction
Transformation of
retirement
• Employer health insurance premiums rose
7.7% in 2006 — twice the rate of inflation.1
Retirement challenges
• A growing number of employers offering health
benefits offer a plan with a minimum deductible
of $1,000.2
Solutions
Conclusion
• The number of large firms (200+ employees)
offering retiree health benefits is only 35%,
down from 66% in 1988.2
1National Coalition
on Health Care,
“Facts on Health Care Costs,” 2007.
2“Employer Health Benefits 2006 Summary
of Findings,” Kaiser Family Foundation.
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
A time to sow, a time to reap
Revolutionary income management
Introduction
Transformation of
retirement
Retirement challenges
Variable expenses — travel, leisure activities, gifts, etc.
Solutions
Conclusion
Fixed expenses — mortgage, utilities, monthly
healthcare and prescription costs, and other regular bills
Wealth transfer — assets designated for your heirs
Healthcare — assets cover expenses beyond routine
prescription and doctors bills, such as an emergency
and long-term care
Emergency/Opportunity funds — immediate cash for
emergencies or financial opportunities
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Introduction
Transformation of
retirement
A shifting income portfolio for your evolving retirement income needs
Retirement challenges
Solutions
Conclusion
Variable expenses
Wealth transfer
Fixed expenses
Healthcare
Emergency/Opportunity funds
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Income strategy allocation
• Growth
• Fixed
• Insured
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
• Liquid
• Miscellaneous
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Growth
• Greater returns; higher risk
• Help maintain accumulation potential
• Greater growth potential
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
• Tax advantages
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Fixed
Introduction
Transformation of
retirement
• Provide fixed, stable income and returns
Retirement challenges
• Subject to some risk
Solutions
Conclusion
• Good for fixed expenses
• May be appropriate for conservative investors
seeking wealth transfer
• Tax advantages
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Insured
• Fixed and growth orientation
• Insurance component with guarantee
• Generally cost more
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
• Tax advantages
Guarantees are backed by the financial strength
of The Lincoln National Life Insurance Company.
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Liquid
• Easy and quick access to your money
• Lower risks and returns
• Traditionally used for emergency funding
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Miscellaneous
• Provide regular income
• Growth and wealth potential
• Estate benefits
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
Several solutions do exist!
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
1
Changing sources of income
• Create diversified portfolio
• Flexibility in how you take income
• Steady payments to you from guaranteed
sources of income
Guarantees are backed by the financial strength
of The Lincoln National Life Insurance Company.
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
2
Income longevity
Introduction
Transformation of
retirement
• Guaranteed lifetime income streams
from annuities
Retirement challenges
Solutions
• Stable income
Conclusion
• Potential for higher returns
Annuities contain both investment and insurance
components, and have fees and charges, including mortality
and expense risk, administrative, and advisory fees. Optional
features and death benefits are available, and may be
purchased for an additional charge.
Guarantees are backed by the financial strength
of The Lincoln National Life Insurance Company.
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
3
Maintaining your lifestyle
• Use stocks or stock mutual funds
• Decide how to spend down assets
• Consider tax-advantaged investments
and financial products
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
• Shift 401(k) and other tax-deferred
assets to IRA
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
4
Managing market volatility
Guarantees are backed by the financial strength
of The Lincoln National Life Insurance Company.
Introduction
• No matter how the market performs, you can receive
a lifetime income.
Transformation of
retirement
• You have the control to design a more conservative
portfolio.
Retirement challenges
• Optional features and death benefits may be
available and can be purchased for an additional
charge.
Conclusion
Solutions
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Finding potential solutions
5
Containing medical costs
• Long-term care insurance
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Get together with your advisor
Types of investment and financial products
• Life insurance
• Long-term care insurance
• Annuities
Introduction
Transformation of
retirement
Retirement challenges
Solutions
Conclusion
• Mutual funds
• Individual stocks
• Individual bonds
• Qualified plans: 401(k), 403(b), etc.
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Summary
Retirement is being revolutionized
Introduction
Transformation of
retirement
Retirement challenges
5 retirement challenges
Solutions
Conclusion
Solutions
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
What’s next?
Start now
Introduction
Transformation of
retirement
Retirement challenges
Talk with your financial advisor
Solutions
Conclusion
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953
Important information
This material was prepared to support the promotion and marketing of insurance and investment
company products. Lincoln Financial Group® affiliates, their distributors, and their respective
employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice.
Any tax statements contained herein were not intended or written to be used, and cannot be used for
the purpose of avoiding U.S. federal, state, or local tax penalties. Please consult your own independent
advisor as to any tax, accounting, or legal statements made herein.
Investment company products are sold by prospectus. Investors should consider the
investment objectives, risks, and charges and expenses of the investment company carefully
before investing. A prospectus contains this and other important information about the
investment. To request a prospectus call 877 533-0003 or obtain one from your investment
representative. Please read it carefully before you invest or send money.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
For educational and informational purposes only.
© 2007 Lincoln National Corporation
UBP-0047-07 LFD0704-0953