For Producer or Broker/Dealer Use Only. Not for Public Distribution.

For Producer or Broker/Dealer Use Only. Not for Public Distribution.

For Producer or Broker/Dealer Use Only. Not for Public Distribution. 2

A 2nd White paper commissioned by MetLife

• First paper: “Retirement Income and the Sensitive Sequence of Returns”

• Second paper: “Retirement Income: The Role of Product Allocation in Sustaining Retirement Income”

• Moshe A. Milevsky, Ph.D.

– Associate Professor of Finance at the Schulich School of Business at York University

– Executive Director of The IFID Centre and CEO of the QWeMA Group, Inc., in Toronto, Canada.


What we’ll be discussing

• Asset allocation vs. product allocation

• Why product allocation?

• Clients’ financial challenges and goals

• The products that can help them insure against risks

• How to decide on a product allocation strategy

• Hypothetical case studies


In retirement, product allocation matters most

VS

Pre-retirement

R.O.A.(Return on Assets)

Asset allocation matters most!

Retirement

R.O.I.(Reliability of

Income)

Products matter most!


Why use a product allocation strategy?

• Reduce risks

• Maximize income

• Sustain income throughout lifetime

• Maintain some liquidity

• Satisfy legacy needs

To help:


Transitioning to retirement…The challenges, the goals

The Goals• Liquidity

• Staying the Course

• Legacy Planning

The Challenges• Longevity Risk

• Inflation Risk

• Sequence of Returns Risk


Longevity Risk

Male: age 65,

has a 50% chance

of living to age 85

Female: age 65,

has a 50% chance

of living to age 88

Couple: both age 65, have a 50% chance of at least one person living to age 92

Source: Annuity 2000 Mortality Table, Society of Actuaries


Inflation Risk


Sequence of Returns Risk

These examples are hypothetical and are for illustrative purposes only. It is not meant to represent performance of any particular investment. These examples are meant to demonstrate the impact of the sequence of returns, assuming annual withdrawals of $50,000 (initially 5% of the account value). Withdrawal charges would apply if withdrawals exceed the contract’s annual free withdrawal amount. If the taxpayer has not attained age 591/2 at the time of the distribution, the portion of the withdrawals that is subject to income tax may also be subject to a 10% Federal income tax penalty. These hypothetical illustrations do not take into account premium taxes. These examples do not take into account any fees or charges that may be associated with a particular product.


Insuring against risks…achieving goals

VariableAnnuities

IncomeAnnuities

SWPs from Traditional

Investments


A Product Spectrum

11

Real Estate Investment Trusts

International Stocks

U.S. Stocks

Mutual Funds

Managed Platforms

Variable Annuities

Indexed Annuities

Bonds

Fixed Annuities

Cash

Aggressive

Conservative


SWPs from traditional investments

• Several investment choices

• Investments tend to be very liquid

• Investor has control of withdrawals

• Easy for investor to change things

• No guarantees

• No protection against market declines

• No incentive to stay the course


VAs with Guaranteed Living Benefits

• Liquidity somewhat restricted; some withdrawals allowed.

• Provide guaranteed income for life

• Offers step-ups or minimum percentage increases and a diversified mix of investment options, including equities

• Offer protection from market declines

• Help investors stay the course

Optional living benefit riders are available for an additional annual charge and are subject to state, broker/dealer and product availability. See prospectus for complete details. Guarantees apply to certain insurance and annuity products, including optional benefits, (not securities, variable or investment advisory products) and are subject to product terms, exclusions and limitations and the insurer’s claims-paying ability and financial strength.


Income Annuities

• Pays out steady, generally fixed income for life

• Payments are guaranteed regardless of market declines

• Payments are generally fixed therefore don’t keep up with inflation

• Investor doesn’t have control

• Payout rate is fixed and initial payment is irreversible

All guarantees are based on the claims-paying ability and financial strength of the issuing insurance company.


Comparing effectiveness in managing risks

Moshe A. Milevsky, Ph.D.: “Retirement Income: The Role of Product Allocation in Sustaining Retirement Income”


Comparing effectiveness in achieving goals

Moshe A. Milevsky, Ph.D.: “Retirement Income: The Role of Product Allocation in Sustaining Retirement Income”


Annuity Benefits may outweigh the costs

• Income annuities tend to have the least amount of out of pocket costs

• SWPs from Traditional investments (stocks, bonds, etc.) vary in cost

• Variable Annuities with living benefits have higher costs to account for their guarantees and protection features

– Income Benefits

– Death Benefits


Clients need all three!


Investments

VariableAnnuities

IncomeAnnuities

VariableAnnuities

IncomeAnnuities


Investments


Deciding on a product allocation for your client

Have your client fill out a questionnaire – here is a sample


Product Allocation: Hypothetical Case Study #1

Meet Denise

• 62 years old.

• Ready to retire from her job.

• Plans to travel with her husband, who is already retired.

• Will receive inflation-adjusted defined benefit pension.

• Additional $1 million to invest.

• Needs an annual income of $55,000 (5.5%) and wants to leave a portion to her beneficiaries.

This hypothetical case study is for illustrative purposes only and should not be viewed as actual investment and/or insurance recommendations.


Denise’s retirement priorities


Denise’s hypothetical product allocation

The product allocation percentages are a result of using QWeMA proprietary methodology called Product Allocation for Retirement Income (PRARI). These allocations are not to be considered investment or financial advice or recommendation for purchase of any MetLife product.


Product Allocation: Hypothetical Case Study #2

Meet Ava

• 62 years old.

• Has an IRA account of $750,000 plus modest Social Security payments.

• Would like an inflation-adjusted income of $39,000 per year upon retirement.

• Hopes to leave a portion of her assets to her son.

This hypothetical case study is for illustrative purposes only and should not be viewed as actual investment and/or insurance recommendations.


Ava’s retirement priorities


Ava’s hypothetical product allocation

The product allocation percentages are a result of using QWeMA proprietary methodology called Product Allocation for Retirement Income (PRARI). These allocations are not to be considered investment or financial advice or recommendation for purchase of any MetLife product.


Product allocation may help sustain income

• All three product categories offer benefits:

– Protection against risks

– Help in achieving financial goals

• There are tradeoffs

• All three categories combined can help your clients sustain retirement income

• Talk to your clients about their priorities

MetLife Sales Desk: 800-848-3854


Prospectuses for variable annuities issued by a MetLife Investors insurance company and for the investment portfolios offered thereunder, are available from MetLife Investors. The contract prospectus contains information about the contract’s features, risks, charges and expenses. The investment objectives, risks and policies of the investment options, as well as other information about the investment options, are described in their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing. Product availability and features may vary by state. Please refer to the contract prospectus for more complete details regarding the living and death benefits.

Variable annuities are long-term investments designed for retirement purposes. MetLife Investors variable and fixed annuities have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no guarantee that any of the variable investment options in this product will meet their stated goals or objectives. The account value is subject to market fluctuations and investment risk so that, when withdrawn, it may be worth more or less than its original value. All contract and rider guarantees, including optional benefits and any fixed account crediting rates or annuity payout rates, are backed by the claims-paying ability and financial strength of the issuing insurance company.

MetLife Investors Fixed Annuities, like all annuities, are insurance products and are not insured by the FDIC, the NCUSIF or any other government agency, nor are they guaranteed by, or the obligation of, the financial institution that sells them.

Important Information


Withdrawals of taxable amounts are subject to ordinary income tax and if made before age 59½, may be subject to a 10% Federal income tax penalty. Withdrawals will reduce the living and death benefits and account value. Withdrawals may be subject to withdrawal charges.

The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance or other financial products and services. Clients should seek advice based on their particular circumstances from an independent tax advisor since any discussion of taxes is for general informational purposes only and does not purport to be complete or cover every situation.MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances.

Variable and fixed annuities are issued by MetLife Investors USA Insurance Company; Charlotte, NC 28277 and in New York, only by First MetLife Investors Insurance Company, New York, NY 10166. All variable products are distributed by MetLife Investors Distribution Company (member FINRA), New York, NY 10036.

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• Not A Deposit • Not FDIC-Insured • Not Insured By Any Federal Government Agency• Not Guaranteed By Any Bank Or Credit Union • May Go Down In Value

Important Information

For Producer or Broker/Dealer Use Only. Not for Public Distribution.

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