When Im Sixty-Five

Are you prepared to lead the retirement revolution?

The thing the Sixties did was to show us the possibilities and the responsibility that we all had. It wasnt the answer. It just gave us a glimpse of the possibility. John Lennon

Table of contents Leading the retirement revolution Introduction The advent of the retirement revolution From counter culture to counter retirement Getting what you want and what you need Confronting the ve challenges of the new retirement Retirement challenges are a-changin, too Planning to lead the retirement revolution A time to sow, a time to reap Finding potential solutions Get together with your nancial advisor Conclusion Volunteer for the revolution 13 8 10 12 4 2 3 1

Die Cut

Are you prepared to lead the retirement revolution?

Retirement, as such, is at an end. Its replacement focuses on activity, not rest; on opportunity, not limits; and on beginnings, not endings. It provides the rebirth of your dreams, the reforging of your career, the redesign of your life. However, the ability to realize these changes to their fullest requires a renovation of how income is created and maintained so that as a retiree, if that word still applies, you can transform your life and the world around you.

Preparing for the next generation of retirement Lincoln Financial Group wants to help you plan a retirement that dees traditional notions, a retirement that inspires others, a retirement that allows you to chase your ideal of a more carefree lifestyle.

When Im Sixty-Five is in the spirit of the Sixties and its legacy, for people who have lived revolutionary lives of passion, of self-determination, of conscience, and who dont want their retirement to be any different. This brochure is designed to help you prepare for the new retirement, overcome its new challenges, and ultimately implement an income stream for a new life as individual as yourself.

The transformation of retirement over the decades In 1950, retirement lasted on average less than three and a half years, because life expectancy was only 68.2 years! Today, a retirement revolution is taking place as millions confront the possibility of living for over 25 years in retirement. What will you do? What do you have planned? More importantly, will you be ready? Retirement is about new possibilities, new opportunities, new experiences with a sense of personal freedom and potential spend it well!

1940
1941 Workers reaching the age of 65 begin to receive a guaranteed federal pension. To pay for Social Security, the United States would build up a reserve fund nanced by new payroll taxes on employers and workers a combined 2% in 1937, rising to 6% in 1949.
Source: Soc. Sec. Admin., 4/05.

1950
1950 Sixteen workers paying into Social Security for every one retiree drawing benets. With technological innovations such advancements in room and central air conditioning, development of Sun Belt cities such as Houston, Atlanta, Miami, and Phoenix in the southern and southwestern states was spurred, leading to the snowbird.
Source: Soc. Sec. Admin., 4/05; Demographic Trends of the 20th Century, U.S. Census Bureau, 4/05.

1946 First Baby Boomers born.

Source: U.S. Census Bureau, 4/05.

1957 While Baby Boom peaks with 4.3 million babies born, highest ever, diaper industry revenues soar more than 50%.
Source: U.S. News and World Report, 3/86.

1990
1990 Oldies radio stations start playing Beatles, Supremes, and Beach Boys songs. 1998 33% of labor force is age 45 and older.
Source: U.S. Census Bureau, 4/05.

2000
2002 Americans age 65 and older spent an average of $3,586 on healthcare, representing about 12% of their total out-of-pocket expenses, according to the U.S. Bureau of Labor Statistics. That share is expected only to increase as healthcare costs rise faster than benets.
Source: U.S. Dept. of Labor Statistics, 4/05.

1999 3.3 workers pay into the Social Security system for every person drawing benets. The Dow Jones Industrial Average, which had stood at just 1,000 in the late 1970s, hit the 11,000 mark in 1999, adding substantially to the wealth of many though not all Americans, allowing many to consider a retirement earlier than they may have planned.
Source: Lipper Inc., 4/05; Soc. Sec. Admin., 4/05.

2007 Sir Paul McCartney turns 65.

1960
1961 The age at which men are rst eligible for old-age insurance was lowered to 62, with reduced benets (women previously were given this option in 1956), ultimately leading to a lowering of the average retirement age. The number of people receiving disability benets more than doubled from 1961 to 1969, increasing from 742,000 to 1.7 million.
Source: Soc. Sec. Admin., 4/05.

1970
1970 University enrollment up 400% since 1945 thanks to Baby Boomers and the GI Bill.
Source: National Center for Educational Studies, 4/05.

1980
1982 Last of the Boomers complete high school; graduation rate of 88.8% highest to date of any generation.
Source: National Center for Education Statistics, 4/05.

1977 It became apparent that Social Security faced a funding shortfall, both in the short-term and in the long-term. The shortterm problem was caused by the bad economy, and the long-term problem by the demographics associated with the baby boom. In a 1975 report trustees said the Trust Funds would be exhausted by 1979. This nancing shortfall was addressed by the 1977 Social Security Amendments.
Source: Soc. Sec. Admin., 4/05.

1985 Workforce participation increases slightly for older American men, and dramatically for older women, and the average age of retirement begins to rise.
Source: Harvard School of Public Health, 4/05.

1965 Health coverage is extended to almost all Americans aged 65 or older. Nearly 20 million beneciaries enrolled in Medicare in the rst three years of the program.
Source: History of Medicare, Soc. Sec. Admin., 4/05.

1987 Dow drops 22% in October.

Source: Lipper Inc., 4/05.

1968 VW sells 423,000 Beetles in the U.S.

The new retirement isnt about rest, but about nding new paths for yourself and others.

2010
2011 First baby boomers will turn 65, and the connection between age and retirement may continue to erode.
Source: U.S. Census Bureau, 4/05.

From counter culture to counter retirement

The old notions of retirement have largely been thrown out as an increasing number of retirees enjoy a more active life than ever before. While people are certainly approaching retirement differently, several of the fundamentals of retirement have changed too life expectancies are signicantly higher than for previous generations, the overall health of retirees is better than ever, and Social Security cannot be depended upon as a primary source of future income.

What are your chances at age 65 of your retirement lasting longer than 25 years?
100% 80% 60% 40% 20% 0% At least one spouse Individual

80

85

90

95

100

105

Age You have an almost 40% chance of reaching 90, and either you or your spouse has a better than 60% chance. Have you planned for 25 years or longer in retirement?
Data source: 2000 Annuity Tables, 4/05.

Why only vacation at your favorite spot? Retirement allows you to build a new life there.
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Getting what you want and getting what you need Greater longevity and assets, combined with your own creativity, have opened the doors of a new perception about what retirement can truly be. The ability to be independent, to be in control of your schedule and plans, also requires the ability to control your assets so that you can help create the level of income that you need with the level of risk you feel is appropriate. You also need the freedom to pursue your retirement goals, requiring greater exibility than previous retirees in structuring your investment portfolio. The opportunity to get back to your dreams or create new ones Potential plans are as individual as each future retiree. What do you have planned? Is there a second career youd like to pursue? An idea you never had time to follow up? Do you want to devote yourself to a hobby, such as nally writing your rst book? Have you decided to go back to school to master a new subject? Are you planning to volunteer for a cause you believe in, such as working with children, a foundation, or a nonprot group? What about travel? Where do you want to go? For how long?

Retirement challenges are a-changin, too

Greater freedom in retirement requires greater stability of income, and the control and exibility to adjust to your evolving needs. The changes in retirement have intensied the challenges future retirees will face, demanding a nancial and retirement plan that accounts for them. What are the ve most pressing challenges for the Retirement Revolution?

Challenge: Changing sources of income The pensions of past generations are gone, Social Security will be diminished. Also, current retirees are nding their retirement spending is declining less than they expected, limiting the opportunities open to them. That means your personal plan must assume greater responsibility for your retirement income, and new sources of income for retirement planning must evolve. Furthermore, you need to use those assets in the most efcient manner possible, while considering additional factors, such as taxes, accessibility, and portfolio allocation. With 58% of current retirees income based on pensions and Social Security, future retirees must reconsider how they may need to make up any potential gap.
Data source: Social Security Fast Facts, 2004, Social Security Administration, 4/05.

Ultimately, you have to nd other sources of income that give you the exibility you need to pursue your retirement your way. Where will all your income come from?

Pursuing your passions full-time may take you to places that would surprise not only previous generations of retirees but also yourself.
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Challenge: Your income must last your lifetime Compared to previous generations, you can expect to live a longer, healthier life in retirement. This great benet also means that you could potentially outlive your income. A longer retirement magnies the impact on your savings at even low withdrawal rates. The table below shows your chances of your retirement savings lasting through a 25 year retirement. The table takes into account the effect of ination by increasing the withdrawal rate by inations rate to create a truly stable income.

Chances of your income lasting throughout a 25-year retirement With a 100% stock portfolio, you only have a 49% chance of your income lasting, but also have considerably higher risk. More importantly, in almost every instance, simply investing in stocks and bonds still falls short more complex strategies or products may be necessary to maintain your income goals.

Data source: Ibbotson Associates, 4/05.

Simulation estimates the range of possible outcomes by using the historical 19262004 annual average return and standard deviation gures for the asset classes and ination. These gures assume that a person retires at year zero and withdraws a required income need each year beginning in year one, the initial annual withdrawal is adjusted by the historical 19262004 ination rate of 3.1% each year, and the reinvestment of income and does not account for taxes or transaction costs. Indices 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 if held to maturity, while returns and principal invested in stocks are not guaranteed. The above indices are unmanaged and unavailable for direct investment. Index past performance cannot guarantee future returns. These projections do not take into account other variables such as uctuating 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.
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Challenge: Maintaining your standard of living Ination constantly erodes what your current savings can buy through increased costs and diminished purchasing power, while taxes reduce your savings returns. Additionally, taking a at 5% annual income from your investment portfolio can create problems over the years, as the buying power of that amount is reduced by ination. And if that Cost of ination Expense
Hotel stay Dining out Admissions to movies,

portfolio is only returning 5% after taxes as well, then your investment base ultimately wont be able to keep up with ination either. Your retirement plans must now include ways for your income and portfolio to keep pace with ination and the impact of taxes.

Time period 19662004 19522004 19772004

Avg. annual ination rate 6.22% 4.28% 5.05%

$1 Equals
(2003)

$0.09 $0.11 $0.26

theater, concerts, and sporting events

Data source: U.S. Bureau of Labor Statistics, 3/05.

Sunday drives can extend into Monday, Tuesday, or even another continent.

Challenge: Market volatility Investing in the equity markets can potentially help you outpace ination and help make your savings last for your lifetime; however, it creates another signicant challenge market volatility. Your income strategy must account for how much of your portfolio is in the market and which tactics you use to help reduce volatility, creating implications for which investments and nancial products you should include in your overall portfolio. 20 0 -20 -40 From 19262004, the market was down 29% of those years an important fact to consider when planning. Challenge: Rising healthcare costs While healthcare costs are increasing overall, they have risen disproportionately higher for retirees. Further, unexpected emergencies and the cost of long-term medical care can easily exhaust your savings faster than expected or eliminate your ability to leave a nancial legacy. While Medicare and Medicaid may help somewhat, maintaining an independent lifestyle requires a strategy for addressing day-to-day healthcare, medical emergencies, and the possibility of long-term care.
The State of Retiree Health Benets, Henry J. Kaiser Family Foundation, 2004. 2 Consumer expenditure survey 2003, U.S. Bureau of Labor Statistics, 2004.
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Positive and negative years of the S&P 500 Index (19262004) 80 60 40

Positive 70.9%

Negative 29.1%

Rising costs for retirees medical coverage 90% of employers are likely to increase retiree contributions to healthcare premiums
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20% of employers are likely to terminate retired employee health benets

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The numbers of employers offering retiree health benets has declined 42% from 1988 to 2003
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Annual medical spending for consumers age 65+ rose 22.3% over consumers age 4555
2

Annual medical spending for consumers age 75+ rose 26.1% over consumers age 4555
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A time to sow, a time to reap

Revolutionizing your future. Your retirement is an opportunity to enter a new phase of your life where you can pursue your dreams as never before. However, planning has to begin now in order to provide time to determine your nancial goals as well as decide how you really want to spend your time. The following principles of income management provide guidelines for you to adjust to your individual situation.
Revolutionary income management This pie chart represents the different uses of your assets during retirement. How much of your portfolio is allocated to each area will be based on your individual needs and goals. Income management
Variable expenses usually include travel, leisure activities, gifts, etc. Fixed expenses include mortgage/rent, utilities, monthly healthcare and prescription costs, and recurring bills Wealth transfer is assets designated for your family or a foundation Healthcare assets cover any expenses beyond routine prescription and doctors bills, such as an emergency and long-term care Emergency/opportunity funds are immediate cash for emergencies you may face or financial opportunities you want to explore

A shifting income portfolio for evolving retirement needs Previous generations of retirees could shift their entire portfolio to income. However, a 30-year retirement requires you to regularly reevaluate the balance between growth potential, protection, and actual income, to help your assets outlast you.

Income strategic allocation Building your income portfolio is the process of selecting the products that will both cover your needs and also work well together. Five overall strategies exist for lling out your income portfolio, with products generally falling into one of the following categories based on their primary characteristics. Growth: Provide historically greater Insured1: While these types

returns, though usually with higher risk, such as equities. Ultimately, these investments help you maintain accumulation potential within your portfolio so that your assets can both potentially outpace ination and last longer than you do. Their more variable nature may make them better suited to variable expenses rather than depending on them for your current xed expenses. However, their greater growth potential makes them essential for maintaining the buying power of your income for your xed expenses in the future. Some may have tax advantages. Fixed: These types of investments

of products may have a growth or xed orientation, the primary characteristic is an insurance component that provides some form of insurance protection. They generally cost more because of it and usually have tax advantages. They include a variety of nancial products including annuities, life insurance, and long-term care insurance2 each of which has its own uses in income management. Liquid: These products provide easy

and quick access to your assets and generally have lower risk and returns, such as certicates of deposits, treasury bills, and money markets funds. They are traditionally used for emergency funding, whether nancial or medical. Miscellaneous: The products in

and products provide xed, stable returns overall bonds for example. Although they can be subject to some risks, they can also include Social Security and pension payments. Overall, these products and sources are good for xed expenses. They also may be appropriate tools for more conservative investors seeking wealth transfer. Some may have tax advantages.

this group vary widely and can provided income, growth potential, or wealth transfer potential. They not only include real estate, but also products and strategies, such as IRAs, 401(k)s, and trusts, which will contain assets similar to those in the other four categories.
Any benets are backed by the claims-paying ability of and are subject to the nancial condition of the insurer. 2 Lincoln does not offer long-term care insurance.
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Enjoying yourself is part of retirement, but the question becomes whether its in the Rockies or Alps.

Finding potential solutions

For each of the ve retirement challenges discussed Changing sources of income, Your income must last your lifetime, Maintaining your standard of living, Market volatility, and Rising healthcare costs several solutions generally exist, allowing you to choose one based on your individual goals and prole. In addition to ensuring that these products and strategies are suitable, you should consider how they work together to provide the best possible mix for your overall portfolio.
1 Changing sources of income: A welldiversied portfolio provides exibility in how you can take your income. Also, guaranteed sources of income can help provide steady income so you are not as dependent on Social Security. 2 Income longevity: Ensure that you cannot outlive your income by using insuring income streams, potentially from annuities. The income these types of insured products provide can become your stable income, along with any pensions and interest from bonds, for your xed expenses. Using investments with higher historical returns, such as equities, can provide longevity to your overall portfolio. When used as income, they may be more appropriate for your more variable expenses, due to their inherently variable nature.
Any benets are backed by the claims-paying ability of and are subject to the nancial condition of the insurer.

3 Maintaining your lifestyle: Use equity-oriented investments, as well as ination-adjusted bonds and mutual funds, in suitable proportion to your overall portfolio, to help keep pace with ination and to help maintain your standard of living. Manage your taxes by planning the order you spend down the different types of assets in your retirement portfolio. Consider using taxadvantaged investments and nancial products, such as tax-exempt mutual funds and life insurance. Also, shifting 401(k) and similar tax-deferred assets to an IRA will maintain their tax-deferred status while potentially providing additional control and exibility.

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4 Managing market volatility: You can receive a steadier income by guaranteeing a portion of your portfolio using annuities. Also, designing a more conservative portfolio in line with your risk tolerances can help reduce volatility.

5 Containing medical costs: Using products, such as long-term care insurance, can help provide you comfort and independence by helping ensure resources for medical care without allocating a signicant amount of your assets.

The retirement revolution offers you the opportunity to pursue life, not watch it the rocking chair will always be there, for only but a brief rest, later.

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Get together with your advisor

In light of the complexity of retirements challenges and potential solutions, crafting an overall nancial and income strategy may seem overwhelming. However, your nancial advisor has tools and resources that can help make this process easier and more effective. Additionally, your advisors understanding of the different types of investments and nancial products can provide possibilities with which you may not be otherwise familiar.
Types of investment and nancial products Life Insurance Long-term Care Insurance Annuities Mutual Funds Individual Stocks Individual Bonds Qualied Plans (401(k), 403(b), etc)

During your retirement, why simply attend ballets when you can train future ballet stars? The retirement revolution is an opportunity to share all of your wisdom and skills in creating a legacy that isnt merely nancial.

Volunteer for the revolution Planning for retirement is the rst step in a transition that ultimately will allow you to return to the more carefree days so you can develop your passions again. Interests that you previously had to enjoy off the clock will become the clock. And as the basic factors of retirement and its challenges have changed signicantly over the decades, retirement planning needs to evolve, also. Stronger nancial planning can help make being 65 a time of anticipation, one that looks toward your personal revolution of retirement.

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A century of experience
At Lincoln Financial Group, we have a 100 year-old heritage of helping people nd solutions to their nancial challenges with the same honesty, integrity, and responsibility that youd expect from our namesake. Its a legacy that we proudly and respectfully continue each day. The strength of Lincoln today Today, Lincoln Financial is one of the largest nancial services companies in the country. We continue a commitment to strength and stability to provide our investors with the condence that we believe is indispensable to who we are. We are a proven industry leader in identifying and delivering sophisticated nancial planning and product solutions for the creation, protection, and enjoyment of wealth. Helping investors redene retirement, their way Lincoln Financial focuses on meeting the needs of investors as they face both greater freedom in how they retire and greater challenges. We offer a complete suite of nancial products and investments to help investors nd solutions for reaching their goals. At Lincoln Financial, we dont believe retirement is the end. On the contrary, it might just be the start of what you were meant for all along.

Important disclosures. Please read.

2005 Lincoln Financial Distributors All rights reserved. www.LFG.com Lincoln Financial Group is the marketing name for Lincoln National Corporation and its afliates. LFD0504-0574 W65-0040-05 W65-CORE RP 8/05 Any tax information contained in this brochure is not intended or written to be used, and it may not be used by any taxpayer, for the purpose of avoiding penalties under the Internal Revenue Code that may be imposed on the taxpayer. This brochure was created to support the promotion or marketing of the transaction(s) or matter(s) addressed in the brochure. A taxpayer should be advised to seek advise based on the taxpayers particular circumstances from an independent tax advisor. Neither Lincoln nor its representatives provide tax or legal advice. You should contact your tax advisor or attorney regarding your particular situation. You should consider the investment objectives, risks, charges and expense of any investment carefully before investing. The prospectus contains this and other important information about the investment. Please request a prospectus from your advisor.

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