A Retirement Income Strategy Guaranteed Income + Growth FOR ADVISOR USE ONLY – No portion of this...

A Retirement Income Strategy

Guaranteed Income + Growth

FOR ADVISOR USE ONLY – No portion of this communication may be reproduced or redistributed.

Canada’s population is aging; a growing number of Canadians are in or nearing retirement:

One in 7 Canadians are senior citizens 36% of the total population is over the age of 50

• 38% of females are over 50• 35% of males are over 50

Source: Statistics Canada, as of July 1, 2013, CANSIM table 051-0001

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Retirement FactsRetirement Facts

Today, more couples are living to age 90!

At age 65, the average Canadian is expected to live to age:• 89, female• 87, male

Clients are concerned more than ever about how to financially manage their retirement…

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Source: Canadian Institute of Actuaries

Retirement FactsRetirement Facts

Pension and Group RRSPs

InvestmentsHome and Rental Properties

Other Savings

Government ProgramsOAS and CPP

Sources of Retirement Income

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Retirement FactsRetirement Facts

“The question isn’t at what age I want to retire, it’s at what income”

– George Foreman

70% of pre-retirement income is recommended to maintain your standard of living

OAS and CPP pay a maximum (total) of $19,078 per year *

* Based on 2014 government ratesFOR ADVISOR USE ONLY – No portion of this communication may be reproduced or redistributed.

Retirement FactsRetirement Facts

The challenge…do your clients want:

To not worry about having enough savings for retirement? Certainty that you won’t outlive your savings? Stability of a guaranteed income? Portfolio diversification? To turn your registered savings into retirement income? A simple, worry-free retirement solution?

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Retirement FactsRetirement Facts

Payout Annuities:

Designed to convert savings into guaranteed income

The money you’ve saved provides an income for as long as you live

Simple, worry-free and guaranteed solution to retirement income needs

Guaranteed Income Solution: Payout Annuity

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Benefits of a Payout Annuity:

Certainty Security Important asset class Mortality credits Tax advantages Guaranteed investment Retirement paycheque

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Guaranteed Income Solution: Payout Annuity

Life Annuity

Provides a guaranteed income benefit for the life of the annuitant(s)

Guarantee periods range from 5 to 30 years Only life insurance companies can offer life annuities Can be based on a single life or joint lives

You don’t have to worry about outliving your income

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Guaranteed Income Solution: Payout Annuity

The Payout Annuity Advantage:

An annuity is the only vehicle which can secure a guaranteed income for life

Potential for creditor protection

Probate fees can be avoided with proper beneficiary designation

Efficient source of guaranteed income

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Guaranteed Income Solution: Payout Annuity

Considering GMWB?

GMWBs are recognized within the Canadian marketplace as a solution for clients concerned about depleting their retirement savings, but:

• Extremely complex to the average consumer• Fees can increase quickly • Investment options are restricted to fixed income and balanced funds• Payout rates have been declining• Inefficient source of guaranteed income

A Retirement Income StrategyA Retirement Income Strategy

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What about a segregated fund or a mutual fund using a Systematic Withdrawal Plan (SWP)?

Money can remain invested in the market and can continue to grow and generate income, but:

• No guarantees that the money will not run out

• Sequence of returns risk (withdrawing in down markets)

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A Retirement Income StrategyA Retirement Income Strategy

Let’s look at three hypothetical scenarios repeating every 5 years given the following assumptions:

$100,000 deposited at age 40 Invested until age 65 with no additional deposits

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Sequence of Returns Risk ExplainedSequence of Returns Risk Explained

Year Favourable Early Bad Early Steady

1 22% -7% 7%

2 15% -4% 7%

3 12% 12% 7%

4 -4% 15% 7%

5 -7% 22% 7%

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Sequence of Returns During Pre-RetirementSequence of Returns During Pre-Retirement

40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 $-

$100,000.00

$200,000.00

$300,000.00

$400,000.00

$500,000.00

$600,000.00

$700,000.00 Favourable Early Bad Early Steady

Age

Let’s look at the same three scenarios in an income phase and how this affects the portfolio value:

$6,000 withdrawn annually at the end of the year Indexed at 3%

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Sequence of Returns Risk ExplainedSequence of Returns Risk Explained

Year Favourable Early Bad Early Steady

1 22% -7% 7%

2 15% -4% 7%

3 12% 12% 7%

4 -4% 15% 7%

5 -7% 22% 7%

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Sequence of Returns During RetirementSequence of Returns During Retirement

65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 $-

$25,000.00

$50,000.00

$75,000.00

$100,000.00

$125,000.00

$150,000.00

$175,000.00 Favourable Early Bad Early Steady

Age

What about a life annuity?

Provides security, knowing the investment vehicle offers guaranteed income for life, but drawbacks include:

• Loss of exposure to equity gains

• Loss of liquidity

• Inflation risk

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A Retirement Income StrategyA Retirement Income Strategy

Let’s bring the equation together to form…

‘A Retirement Income Strategy’

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Consider the following combination investment solution:

Payout Annuity

+

Segregated Fund

Guaranteed Income

+

Growth with estate planning features

»

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A Retirement Income StrategyA Retirement Income Strategy

Your clients are looking for a structure that will:

Manage longevity risk

Provide guaranteed, dependable income for life

Offer the potential for growth

Allow them to lock in market gains

Provide the security of guarantees

Offer estate planning features

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A Retirement Income StrategyA Retirement Income Strategy

A Retirement Income StrategyA Retirement Income Strategy

Payout Annuity + Segregated Fund Process:

Essential income calculator Purchase Payout Annuity to meet fixed needs

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A Retirement Income StrategyA Retirement Income Strategy

Determining Payout Annuity Single Premium:

Calculate retirement income needs Calculate existing sources of retirement income

• CPP/OAS• Employer pension

The difference is the additional income amount required from the Payout Annuity

Solve for the single premium required to provide

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A Retirement Income StrategyA Retirement Income Strategy

Payout Annuity + Segregated Fund Process:

Essential income calculator Purchase Payout Annuity to meet fixed needs Deposit remainder to Segregated Funds

• Use remaining funds on a discretionary basis

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Meet Robert… Just turned 65 Ready to retire Joe has a modest company pension Eligible for CPP/OAS RRSP assets of $500,000 In good health 2 grown children

Robert wants: some guaranteed lifetime income to benefit from market growth during

retirement to leave his children some inheritance

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A Retirement Income StrategyA Retirement Income Strategy

Currently, Robert’s pre-retirement portfolio is:

• Equities • Fixed income• Cash & equivalents

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A Retirement Income StrategyA Retirement Income Strategy

Equities

Fixed income

Cash & equivalents

A Retirement Income StrategyA Retirement Income Strategy

Let’s follow the process for Robert:

Essential income calculator Purchase Payout Annuity to meet fixed needs Deposit remainder to Segregated Funds

A Retirement Income StrategyA Retirement Income Strategy

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A Retirement Income StrategyA Retirement Income Strategy

Benefits of a Payout Annuity + Segregated Fund combo:

• Life Annuity guarantees income payment for life• Segregated Fund investments capture market growth• Flexibility within investment allocation of the

Segregated Fund at any time• Peace of mind through control and guarantees• Estate planning benefits from insurance products• Increased likelihood of residual estate value

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A Retirement Income StrategyA Retirement Income Strategy

Benefits to you:

• Compensation structure:• Segregated Fund commission: upfront commission at deposit

and trailer paid monthly on the remaining balance• Payout Annuity commission: upfront commission paid on

initial deposit

• Opportunity for clients to consolidate assets• Increase assets• Greater possibility to retain assets at death• Increased likelihood of higher trail over time

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Robert’s optimized retirement income portfolio will look like:

• Payout Annuity• Segregated Funds

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A Retirement Income StrategyA Retirement Income Strategy

Payout Annuity

Seg-re-

gated Funds

• Any statements contained herein that are not based on historical fact are forward-looking statements. Any forward-looking statements represent the portfolio manager’s best judgment as of the present date as to what may occur in the future. However, forward-looking statements are subject to many risks, uncertainties and assumptions, and are based on the portfolio manager’s present opinions and views. For this reason, the actual outcome of the events or results predicted may differ materially from what is expressed. Past performance does not guarantee future performance.

• Please note that both our Death Benefit Guarantee 100%, and Maturity Benefit Guarantee 75%, are reduced proportionately for all withdrawals or transfers that the client makes.

• Investors do not purchase units of the funds but, rather, an individual variable insurance contract issued by Equitable Life of Canada.

• This presentation is intended for informational purposes only and is provided with the understanding that it does not render legal, accounting or other professional advice. Equitable Life has made every effort to ensure the accuracy of this presentation, however, accuracy is not guaranteed.

• Unless otherwise indicated, ® denotes a trademark of The Equitable Life Insurance Company of Canada. Reproduction or redistribution of this presentation, in whole or in part, without permission from Equitable Life is forbidden.

• © 2014 The Equitable Life Insurance Company of Canada. All Rights Reserved.

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Thank you

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