What Steps Can You Take?
RETIREMENT CHALLENGES, SOLUTIONS & THE ROLE OF THE PLAN SPONSOR
1 GE-98387 (10/14)
AXA Equitable Life Insurance Company (NY, NY)
Evolution of US Retirement System
2 |
1875
American Express establishes 1st private pension
1900
Life Expectancy was 49 for both genders
1919
Over 300 Private Pension plans are created to compete for workforce
1920
State Teachers Retirement System of OH was established
1935
Social Security was enacted into law
1945
75% of the country pays income tax, up from 6% in 1940
1958
Section 403(b) in the IRS code was formalized
1979
Johnston & Johnston adopts the 1st 401k plan
1980
80% of the private sector offered Pension Plans
2014
Over 525,000 401k plans w/ nearly $4.4T in AUM exist today
2014
Less than 26% of the private sector currently offers pension plans
PENSION TSUNAMI
U.S. Facing a $1 Trillion Pension Shortfall According to Pew Charitable Trust:
“Three states -- Illinois, Kentucky and Connecticut -- have less than half of their pension programs funded. Illinois is in the hole by more than $100 billion” “There are two big reasons states have fallen behind. First, a lot of the funds are held in stocks, and returns on those investments fell during the Great Recession.” .50% Change in assumption can decrease unfunded liability by 20% “Second, some states have failed to make the required contribution to their pension programs” TRUTH & INTEGRITY IN STATE BUDGETING http://money.cnn.com/2015/07/14/retirement/worst-state-pensions/
4 |
Teachers Retirement System Short falls Rank 1 2 3 4 5 6 7 8 9 10
State Illinois Kentucky Connecticut Alaska Kansas New Hampshire Mississippi Louisiana Hawaii Massachusetts
18
INDIANA
Funding ratio 2014 39.30% 44.2 49.1 54.7 56.4 56.7 57.6 58.1 60 60.8
64.4
26 States are under funded even with a benchmark as low as 70% for funding requirement
5 |
Overcoming Common Retirement Challenges
L.I.V.E What Steps Can you Take?
L
I
V
E
Longevity You or your spouse may live to be 90 or 95 years old. Do you have enough money to live more than 25 years in retirement?
Inflation The goods and services you buy today may cost more tomorrow. Are you prepared for a drop in your purchasing power?
Volatility A volatile financial market can wipe out your retirement investments. Do you have the proper protection to weather a bad storm?
Expectations If you want the same lifestyle in retirement you probably need to save more today. Are your expectations out of line with your bottom line?
7 |
LONGEVITY Average Life Expectancy 90
76
80
81
70 60 50
46
48 Men Women
40 30 20 10 0 1900 8 |
2010
What Steps Can You Take? Longer Lives. Longer Retirement Retirement Can last 25 years A man turning 65 today can expect to live until age 84.3, 86.6 for Women of similar age
1 out 4 65 year old can expect to live past 90 1 out of 10 65 year old can expect to live past 95 A couple spending $15 a day for meals over 19 years, will pay over $200k in food alone -
9 |
Make Sure Your Savings Last As Long As You Do There are a number of ways to prepare for Longevity Start setting aside now – It’s never too late Find a way to save more – understand your contribution limits Consider deferring your retirement Gradually increase your income withdrawal in retirement to combat inflation ___________________________________________________________ Do I Know My Life Expectancy? How Much will I need to set aside for Retirement? I’m retired, how long will my income last?
10 |
INFLATION How Inflation Impacts your Buying Power
Your Shrinking Income Annual Inflation Rate
Value At Retirement
Required Amount after 10 years
Required Amount After 20 Years
Required Amount After 30 Years
3%
$50,000
$67,196
90,306
$121,363
5%
$50,000
$132,665
132,665
$216,097
7%
$50,000
$193,484
193,484
$380,613
Richard A. Howard, Buyupside.com, “Inflation calculator – Save Enough to Account for Inflation,” 11 |
What Steps Can You Take? The Invisible Enemy
So How Worried should I Be? Consider you have $50k in the bank, at 3% inflation rate, your value is reduced by 25% in 10 years and 50% in 30
What steps can I Take To Minimize this risk? Evaluate your investment portfolio to ensure you are positioned to outpace inflation today and well into your retirement. Work with your advisor to implement inflation hedging strategies Diversify
12 |
VOLATALITY Will History Repeat itself?
S&P 500 from 1997 -2012
13 |
What Steps Can You Take? Market Fluctuation vs Next Egg Allocate & Diversify • Have a balanced Portfolio • Don’t put your Eggs in one basket • Make sure you’re exposed across various asset classes and industries Stay the Course • Take the emotions out of it • Have a long-term investment strategy • Stick to the plan Invest Regularly • Spread your investing over time • Invest on a regular schedule regardless of market swings Periodically Re-evaluate Your Investment Strategy • Are you meeting with your Advisor for your regular check up? AXA can Help You Manage Market Volatility 14 |
EXPECTATIONS The Biggest Risk to Your Retirement? Unrealistic Expectations
When will I retire? 52? 54? 55? How much money will I need? Where will my income come from? 50% expect their expenses to decrease in retirement 70% don’t know how much income they’ll need at retirement
70% haven’t developed a written plan for retirement
73% are confident they will retire as planned 15 |
What Steps Can you Take? Missing Out on Professional Advice?
Schwab Study1
87% more likely to have someone change the oil in their car than assistance in choosing retirement plan investments Participants spend the same amount of time reviewing & choosing investments for their retirement plan as they do investigating cell phones Participants spend more than twice as much time researching cars before buying than evaluating retirement plan options -
Lifetime vs. temporary decisions
50% surveyed say retirement plan investment information is more confusing than health care benefits
One in three admit they feel stress when it comes to allocating retirement plan dollars 1 – Source: “Majority of Participants Missing Out on Professional Investment Advice” by Schwab Investor Services News 2014 16
The Impact of Financial Advisors What Steps Can You TAKE? INFLUENCING BEHAVIORS EARLIER SAVINGS RATE
HIGHER CONTRIBUTION LEVELS
2 3
33%
out of
ENHANCING OUTCOMES HIGHER MEDIAN BALANCE
34% 17 |
OVERALL SATISFACTION
85%
VS
59%
DOES THE EMPLOYER HAVE A ROLE
Participation & Contribution Deficiency Participation Rate:
Public Schools < approximately 30%1 Private Sector 401(k) 70%+2 -
Company match normally drives private sector participation PS not subject to ERISA Enrollment left to discretion of each employee to do something No specific job function in a district
Saving Enough: The positive- start with as little as $200 - Good to start, not the way to finish - Participants don’t increase without guidance
Both public and private sector don’ put away enough -
In plans with auto enrollment, 68% have auto deferral rate of 3% or less3
- Only 65% of participants put away enough to receive the full matching contribution3
19
1 – Source: Industry Estimated average 2013 2 – Source: Charles Schwab “New Rules of Engagement” study June 2009 3 – Source: PLANSPONSOR Defined Contribution Survey 2011
What Can You Do as a Plan Sponsor? Evaluate the success of your plan How many employees are taking advantage of this special benefit?
Equally important for both employee and employer Learn some best practices established by some of your peers to increase the success of your 403(b) plan
"AXA" is the brand name of AXA Equitable Financial Services, LLC and its family of companies, including AXA Equitable Life Insurance Company (NY, NY), AXA Advisors, LLC, and AXA Distributors, LLC. AXA S.A. is a French holding company for a group of international insurance and financial services companies, including AXA Equitable Financial Services, LLC. The obligations of AXA Equitable Life Insurance Company are backed solely by their claims-paying ability. AXA Equitable Life Insurance Company (NY. NY) is an issuer of annuity and life insurance products. Variable products are co-distributed by affiliates, AXA Distributors, LLC and AXA Advisors, LLC. 20
Best Practices: Policy Guidelines 403(b) TSA Providers for Public Schools (K–12)
Plan Sponsors should determine what they would like the 403(b) program to accomplish. Offer employees a strong benefit to help identify and address their retirement planning goals. Provide a variety of programs to meet the public school’s employees’ diverse needs. Full service options and “do it yourself” choices.
21
Our Dedication to the 403(b) Market U.S. Retirement Plan Leader1 $25b plan assets 29k plans throughout the country 824,000 participants
Q4 LIMRA data #1 in K-12 participants with 599,349 #1 in K-12 in gross premium with $785m
Approximately 850 Financial Professionals Nationwide dedicated to tax-exempt retirement plan business
1
Totals include 401(k), 403(b), 401(a), and 457(b) figures (as of 6/30/14).
"AXA" is the brand name of AXA Equitable Financial Services, LLC and its family of companies, including AXA Equitable Life Insurance Company (NY, NY), AXA Advisors, LLC, and AXA Distributors, LLC. AXA S.A. is a French holding company for a group of international insurance and financial services companies, including AXA Equitable Financial Services, LLC. The obligations of AXA Equitable Life Insurance Company are backed solely by their claims-paying ability. 22
AXA Equitable Life Insurance Company (NY. NY) is an issuer of annuity and life insurance products. Variable products are co-distributed by affiliates, AXA Distributors, LLC and AXA Advisors, LLC.
THANK YOU
23 |
1 GE-98387 (10/14)
AXA Equitable Life Insurance Company (NY, NY)
Evolution of US Retirement System
2 |
1875
American Express establishes 1st private pension
1900
Life Expectancy was 49 for both genders
1919
Over 300 Private Pension plans are created to compete for workforce
1920
State Teachers Retirement System of OH was established
1935
Social Security was enacted into law
1945
75% of the country pays income tax, up from 6% in 1940
1958
Section 403(b) in the IRS code was formalized
1979
Johnston & Johnston adopts the 1st 401k plan
1980
80% of the private sector offered Pension Plans
2014
Over 525,000 401k plans w/ nearly $4.4T in AUM exist today
2014
Less than 26% of the private sector currently offers pension plans
PENSION TSUNAMI
U.S. Facing a $1 Trillion Pension Shortfall According to Pew Charitable Trust:
“Three states -- Illinois, Kentucky and Connecticut -- have less than half of their pension programs funded. Illinois is in the hole by more than $100 billion” “There are two big reasons states have fallen behind. First, a lot of the funds are held in stocks, and returns on those investments fell during the Great Recession.” .50% Change in assumption can decrease unfunded liability by 20% “Second, some states have failed to make the required contribution to their pension programs” TRUTH & INTEGRITY IN STATE BUDGETING http://money.cnn.com/2015/07/14/retirement/worst-state-pensions/
4 |
Teachers Retirement System Short falls Rank 1 2 3 4 5 6 7 8 9 10
State Illinois Kentucky Connecticut Alaska Kansas New Hampshire Mississippi Louisiana Hawaii Massachusetts
18
INDIANA
Funding ratio 2014 39.30% 44.2 49.1 54.7 56.4 56.7 57.6 58.1 60 60.8
64.4
26 States are under funded even with a benchmark as low as 70% for funding requirement
5 |
Overcoming Common Retirement Challenges
L.I.V.E What Steps Can you Take?
L
I
V
E
Longevity You or your spouse may live to be 90 or 95 years old. Do you have enough money to live more than 25 years in retirement?
Inflation The goods and services you buy today may cost more tomorrow. Are you prepared for a drop in your purchasing power?
Volatility A volatile financial market can wipe out your retirement investments. Do you have the proper protection to weather a bad storm?
Expectations If you want the same lifestyle in retirement you probably need to save more today. Are your expectations out of line with your bottom line?
7 |
LONGEVITY Average Life Expectancy 90
76
80
81
70 60 50
46
48 Men Women
40 30 20 10 0 1900 8 |
2010
What Steps Can You Take? Longer Lives. Longer Retirement Retirement Can last 25 years A man turning 65 today can expect to live until age 84.3, 86.6 for Women of similar age
1 out 4 65 year old can expect to live past 90 1 out of 10 65 year old can expect to live past 95 A couple spending $15 a day for meals over 19 years, will pay over $200k in food alone -
9 |
Make Sure Your Savings Last As Long As You Do There are a number of ways to prepare for Longevity Start setting aside now – It’s never too late Find a way to save more – understand your contribution limits Consider deferring your retirement Gradually increase your income withdrawal in retirement to combat inflation ___________________________________________________________ Do I Know My Life Expectancy? How Much will I need to set aside for Retirement? I’m retired, how long will my income last?
10 |
INFLATION How Inflation Impacts your Buying Power
Your Shrinking Income Annual Inflation Rate
Value At Retirement
Required Amount after 10 years
Required Amount After 20 Years
Required Amount After 30 Years
3%
$50,000
$67,196
90,306
$121,363
5%
$50,000
$132,665
132,665
$216,097
7%
$50,000
$193,484
193,484
$380,613
Richard A. Howard, Buyupside.com, “Inflation calculator – Save Enough to Account for Inflation,” 11 |
What Steps Can You Take? The Invisible Enemy
So How Worried should I Be? Consider you have $50k in the bank, at 3% inflation rate, your value is reduced by 25% in 10 years and 50% in 30
What steps can I Take To Minimize this risk? Evaluate your investment portfolio to ensure you are positioned to outpace inflation today and well into your retirement. Work with your advisor to implement inflation hedging strategies Diversify
12 |
VOLATALITY Will History Repeat itself?
S&P 500 from 1997 -2012
13 |
What Steps Can You Take? Market Fluctuation vs Next Egg Allocate & Diversify • Have a balanced Portfolio • Don’t put your Eggs in one basket • Make sure you’re exposed across various asset classes and industries Stay the Course • Take the emotions out of it • Have a long-term investment strategy • Stick to the plan Invest Regularly • Spread your investing over time • Invest on a regular schedule regardless of market swings Periodically Re-evaluate Your Investment Strategy • Are you meeting with your Advisor for your regular check up? AXA can Help You Manage Market Volatility 14 |
EXPECTATIONS The Biggest Risk to Your Retirement? Unrealistic Expectations
When will I retire? 52? 54? 55? How much money will I need? Where will my income come from? 50% expect their expenses to decrease in retirement 70% don’t know how much income they’ll need at retirement
70% haven’t developed a written plan for retirement
73% are confident they will retire as planned 15 |
What Steps Can you Take? Missing Out on Professional Advice?
Schwab Study1
87% more likely to have someone change the oil in their car than assistance in choosing retirement plan investments Participants spend the same amount of time reviewing & choosing investments for their retirement plan as they do investigating cell phones Participants spend more than twice as much time researching cars before buying than evaluating retirement plan options -
Lifetime vs. temporary decisions
50% surveyed say retirement plan investment information is more confusing than health care benefits
One in three admit they feel stress when it comes to allocating retirement plan dollars 1 – Source: “Majority of Participants Missing Out on Professional Investment Advice” by Schwab Investor Services News 2014 16
The Impact of Financial Advisors What Steps Can You TAKE? INFLUENCING BEHAVIORS EARLIER SAVINGS RATE
HIGHER CONTRIBUTION LEVELS
2 3
33%
out of
ENHANCING OUTCOMES HIGHER MEDIAN BALANCE
34% 17 |
OVERALL SATISFACTION
85%
VS
59%
DOES THE EMPLOYER HAVE A ROLE
Participation & Contribution Deficiency Participation Rate:
Public Schools < approximately 30%1 Private Sector 401(k) 70%+2 -
Company match normally drives private sector participation PS not subject to ERISA Enrollment left to discretion of each employee to do something No specific job function in a district
Saving Enough: The positive- start with as little as $200 - Good to start, not the way to finish - Participants don’t increase without guidance
Both public and private sector don’ put away enough -
In plans with auto enrollment, 68% have auto deferral rate of 3% or less3
- Only 65% of participants put away enough to receive the full matching contribution3
19
1 – Source: Industry Estimated average 2013 2 – Source: Charles Schwab “New Rules of Engagement” study June 2009 3 – Source: PLANSPONSOR Defined Contribution Survey 2011
What Can You Do as a Plan Sponsor? Evaluate the success of your plan How many employees are taking advantage of this special benefit?
Equally important for both employee and employer Learn some best practices established by some of your peers to increase the success of your 403(b) plan
"AXA" is the brand name of AXA Equitable Financial Services, LLC and its family of companies, including AXA Equitable Life Insurance Company (NY, NY), AXA Advisors, LLC, and AXA Distributors, LLC. AXA S.A. is a French holding company for a group of international insurance and financial services companies, including AXA Equitable Financial Services, LLC. The obligations of AXA Equitable Life Insurance Company are backed solely by their claims-paying ability. AXA Equitable Life Insurance Company (NY. NY) is an issuer of annuity and life insurance products. Variable products are co-distributed by affiliates, AXA Distributors, LLC and AXA Advisors, LLC. 20
Best Practices: Policy Guidelines 403(b) TSA Providers for Public Schools (K–12)
Plan Sponsors should determine what they would like the 403(b) program to accomplish. Offer employees a strong benefit to help identify and address their retirement planning goals. Provide a variety of programs to meet the public school’s employees’ diverse needs. Full service options and “do it yourself” choices.
21
Our Dedication to the 403(b) Market U.S. Retirement Plan Leader1 $25b plan assets 29k plans throughout the country 824,000 participants
Q4 LIMRA data #1 in K-12 participants with 599,349 #1 in K-12 in gross premium with $785m
Approximately 850 Financial Professionals Nationwide dedicated to tax-exempt retirement plan business
1
Totals include 401(k), 403(b), 401(a), and 457(b) figures (as of 6/30/14).
"AXA" is the brand name of AXA Equitable Financial Services, LLC and its family of companies, including AXA Equitable Life Insurance Company (NY, NY), AXA Advisors, LLC, and AXA Distributors, LLC. AXA S.A. is a French holding company for a group of international insurance and financial services companies, including AXA Equitable Financial Services, LLC. The obligations of AXA Equitable Life Insurance Company are backed solely by their claims-paying ability. 22
AXA Equitable Life Insurance Company (NY. NY) is an issuer of annuity and life insurance products. Variable products are co-distributed by affiliates, AXA Distributors, LLC and AXA Advisors, LLC.
THANK YOU
23 |
