Annuities

The Future of Charitable Giving


Annuities

In the financial world, 2018 was an eventful year – starting with the most sweeping tax reform in decades.

The reform had a lot of positive impacts, but I think one unintended consequence was the impact on charitable giving. Because of the new standard deduction, it’s estimated that only 16 million taxpayers will able to make a deduction for their charitable contributions. That’s down more than 50 percent from when the standard deduction was not as high and more people itemized.1

Many charities will likely see reduced gifting because donors lose the financial benefits of making a donation. However, a few outlets have been talking about a unique gifting strategy – Qualified Charitable Distributions, or QCDs.

QCDs aren’t new. They’ve just been out of favor – or at least unknown – for some time. Previous tax brackets and limits for itemized deductions made this strategy less favorable. Today, with a higher standard deduction for individuals and older couples, QCDs will become much more valuable for charitable contributions.

 

If you’re not familiar, here’s how QCDs work:

  • Your clients send their required minimum distributions (limit $100,000 per person) to a charity
  • The distribution is tax free – that’s an important distinction
  • The QCD does not go into the calculation for Modified Adjusted Income or Combined Income, which are used to calculate annual tax on Social Security income, and also affect the amount of premium a client pays for Medicare Part B health insurance


For retirees, the result can be hundreds to thousands of dollars in tax and premium savings. Using this type of charitable contribution allows your clients to continue benefiting their favorite charity without taking a hit to their personal finances.

 

Winning Strategy

2019 is new ballgame. New tax laws. New regulations. New strategies. Try a new way to help clients with Qualified Charitable Distributions.

Retirement Webinar

Craving More?

Catch the final retirement webinar of 2018 where Mike is joined by retirement income expert Patricia Taylor, MBA, ChFC®, CFS®.

Watch the replay to hear case studies and strategies that highlight new, untapped and hidden opportunities for 2019, and how you can make yourself more referable than your competition!

Watch Now!

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

 

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1Tax Foundation, “Nearly 90 Percent of Taxpayers Are Projected to Take the TCJA’s Expanded Standard Deduction,” September 2018: https://taxfoundation.org/90-percent-taxpayers-projected-tcja-expanded-standard-deduction/

Retirement QCDs Charitable Giving

Why Your Clients Can’t Live With 2 Percent


Annuities

Many people say they can’t take a 2 percent return on their money. This was especially true after the financial crisis and the aggressive monetary policy in the United States. However, many Americans have felt that 2 percent was a good return on vehicles like certificates of deposit or money market accounts. Regardless of your perspective, you can never take 2 percent as a probability of success in your retirement plan.

Well, that’s exactly what you might find for many Americans. With just one, three-year long-term care event during retirement, an otherwise successful plan could be wiped out. In fact, we have several case studies that show the impact of a long-term care event on a retirement portfolio. All are devastating to the probability of success, regardless of market performance.

We find that many people who use Social Security properly and have saved a comfortable nest egg can generally retire at or close to their spending levels. That’s not to say that annuities can increase the probability of success to higher levels, but most Americans aren’t too far off their goals with a few solutions, not sacrifices.

However, if we factor in a long-term care event, that dramatically changes the client’s chances of success. In many cases, the probability of success drops from 85-95 percent down to just 2 percent for a healthy spouse. A client can feel comfortable with 85 percent, but not 2 percent.

The solution is properly planning for long-term care through by shifting the risk to an insurance carrier. The additional capital or cash flow rarely replenishes the probability of success to the full 95 percent; however, it typically moves the number back to 70-80 percent. We commonly hear, “I can live with 70 percent, but I can’t live with 2 percent.”

Many people have been comfortable living with 2 percent for a rate of return. Unfortunately, when you show them 2 percent probability of success, they lose nearly all comfort and confidence. Make sure you provide an appropriate probability of success to your clients’ retirement plans by addressing the risk of long-term care.

 

Winning Strategy

Talk about long-term care. Ask questions. It could mean the difference between a success rate of 95 percent or 2 percent.

Winning Strategies

Craving More?

Catch the latest Winning Strategies video where Mike dives into risks in retirement!

One of the largest risks in retirement is a long-term care event.Mike shares two winning strategies you can implement as an advisor to help clients make it through retirement with confidence.

Watch Now!

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

Retirement Winning Strategies LTC Social Security

3 Ways to Protect Against Inflation in Retirement


Annuities

More Americans are living to age 100 than ever before and the number continues to grow. If you are looking at separating yourself from the competition, you must address the impact of inflation on both income and assets for your retirees.

Some people consider inflation to be the cruelest tax of all. It slowly eats away at the value of the dollar over time. Most people don’t feel it year-by-year. But at some point in the future, the client will wake up and say they can’t afford the same things they did at the beginning of retirement. That’s on us.

One of the best strategies to protect income erosion is to maximize guaranteed income streams that have inflation protection. Below are a few examples.

  1. Social Security – This income stream has a built-in inflation hedge with annual increases tied to an index reflecting consumer price increases. If you position Social Security correctly, and leverage its growth past Full Retirement Age, the higher income grows with the index. This provides a higher likelihood that the retiree will be able to afford the same things in 20 years that they do today.
  1. Guaranteed Income Annuities – With any asset that you control, you can leverage the power of guaranteed income options available on some annuities. It’s important to realize that any person should limit the amount of funds that go into annuities to the proper allocation. If too much of a person’s assets go into a conservative vehicle like annuities, it can actually decrease the probability of retirement success.
  1. Inflation Riders – Several income riders can provide increases tied to the underlying index. Single-premium annuities have options for a guaranteed 3-5 percent inflation adjustment. You need to understand the client’s risk tolerance before deciding which solution is appropriate for them. Maintaining control is an important aspect with many clients that should not be overlooked.

Regardless of the solution you provide for inflation, make sure you don’t make your client sacrifice their standard of living due to loss of buying power.

 

Winning Strategies

Protect clients from inflation. Make sure not only their assets but also the income streams increase with inflation during retirement.

Winning Strategies

Craving More?

Catch the latest Winning Strategies video where Mike dives into risks in retirement!

One of the largest risks in retirement is a long-term care event.Mike shares two winning strategies you can implement as an advisor to help clients make it through retirement with confidence.

Watch Now!

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

Retirement Inflation Annuities Mike McGlothlin Social Security Guaranteed Income Annuities

How to Put Old Annuities to Work


Annuities

I’ve said it before, and I’ll say it again: One of the easiest ways to secure your clients’ retirement success is by addressing long-term care.

The cost of extended care continues to escalate. And it will continue to climb as Americans live longer and the demand for care increases. If you’re not protecting against this risk, you’re doing you and your clients a huge disservice.

Today, there are more than $471 billion of annuities on the books of insurers.1 Rarely do our clients annuitize these older annuities, and the utilization rate for income riders remains low. Both of these facts make me think that many people purchased these fixed and indexed annuities for a future need or emergency. If that is the case, why not apply the annuity for the specific purpose of covering emergencies?

Under current tax law, annuity owners are allowed a tax-free exchange between annuities under certain circumstances. The contract being exchange and purchased must have the same owner and annuitant and considered like-for-like. If the exchange meets that criteria, the embedded gains (deferred interest) may continue to be deferred in the new contract being purchased.

With the Pension Protection Act, there is a new level of tax-free status with nonqualified annuities. When the client has a qualifying long-term care event, proceeds from the annuity are received tax-free. That includes the carrier’s funds as part of the long-term care insurance, the original principal (cost basis), and all the deferred gains in the contract. Older contracts like variable annuities, fixed annuities, and fixed indexed annuities qualify for this exchange treatment and potential for tax-free distributions due to long-term care.

Your clients’ needs change over time. You routinely adjust their asset allocation with market conditions and changes in risk tolerance as they age. You can also change the purpose of their existing annuities to match their current purpose.

Take a look at your existing book of business. Or, ask about a prospective client’s annuity holdings. It’s likely to make a lot of sense to your clients to re-purpose some of their assets in order to create leverage and tax efficiency.

 

Winning Strategy

Turn old assets with tax-deferred gains into tax-free distributions for long-term care event. The transaction is easy to complete and benefits many who are holding older annuities for an emergency.  

Winning Strategies

Craving More?

Across the country, advisors are telling us they’d love to find a steady stream of clients. Well, more than $3 trillion in pension assets are ready to move to either insurance carriers or employees in the next two decades. So, with the right approach, pension risk transfer can provide sustainable growth for any financial services firm.

Join us for a powerful webinar featuring Pension Risk Transfers in today’s financial world.

Catch the Replay!

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

 

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1Insured Retirement Institute Fact Book 2018, 17th edition: https://www.myirionline.org/research/research-detail-view/iri-fact-book-2018-17th-edition-(single-license-download)

Retirement Mike McGlothlin tax-deferred gains tax-free distributions LTC Annuities

Get Me Within Two Baskets


Annuities

It was the 1987 NCAA Regional Finals. We were playing Louisiana State University, and with less than 8 minutes to go, we were down by 8 points. For the first time in Indiana’s run to the National Championship, you could feel a little doubt that we would dig ourselves out of this particular hole.

During a timeout, Coach Bob Knight didn’t make any major adjustments. He reminded the team to do what we had been working on since the beginning of the season. We just had to do it with more accuracy and precision during the final minutes at the game.

Before they left the huddle, Coach looked the players in the eye and said, “Get me within two baskets with two minutes to go, and I will win this game for us.

Now, you may think that’s an arrogant statement. I don’t. I find it confident. Spoiler alert: As you’ll read in my book, “Free Throws for Financial Professionals,” Coach delivered on his promise. You can deliver on your promises, too.

Coach Knight’s statement demonstrates the leadership that all of our clients want from us. That statement is exactly what every prospective client wants to hear from their planning: Get me to the finish line and show me how to win.

Professor William F. Sharpe indicated that retirement income planning was the hardest problem he ever worked on during his career. I would argue that it’s the most complex problem that your clients will ask you to solve for them. That’s why you need to look at it differently.

Just like Coach Knight said in that timeout, you don’t have to do a bunch of new or different things. You just have to perform with accuracy and precision. You have products and tools available to shift a multitude of risks in retirement. You just have to do the fundamentals better. And, no matter what happens, you have to look your clients in the eyes and help them win.

Winning Strategies

Craving More?

Across the country, advisors are telling us they’d love to find a steady stream of clients. Well, more than $3 trillion in pension assets are ready to move to either insurance carriers or employees in the next two decades. So, with the right approach, pension risk transfer can provide sustainable growth for any financial services firm.

Join us for a powerful webinar featuring Pension Risk Transfers in today’s financial world.

Catch the Replay!

 

Winning Strategy

Get your client in a position to win with tools and products that have been around for decades. Think about using them differently to maximize success.

 

About the Author

Mike McGlothlin is a team leader, retirement industry activist and disciple of Indiana Hoosier basketball. In addition to being EVP of retirement at Ash Brokerage, he is a sought-after writer and speaker. His web series, “Winning Strategies,” provides insight and motivation for financial advisors in many forms – blogs, books, videos, podcasts and more. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

Retirement Free Throws for Pros Mike McGlothlin Annuities Business Success Positioning