According to a recent MarketWatch survey, 52 percent of retirees said they are pulling money out of their retirement accounts simply as the need arises – with no real plan in place. Most retirees fail to create an income plan, yet poll after poll suggests that their biggest worry is outliving their money.
So what advice are these retirees given?
The list of advice goes on and on ....
I say if you want to BE sure … INSURE. Consider an annuity with a lifetime income rider. This strategy GUARANTEES a lifetime income payment for as long as you live.
A client’s lifetime income payment is based on their annuity income base and their age when they decide to start lifetime income payments. Some annuities even offer an increasing lifetime payment opportunity. Most importantly, employing this strategy guarantees an income payment for life.
It is worth repeating: If you want to BE sure … INSURE!
In my hometown of Indianapolis, Indiana, the month of May brings spring, warmer temperatures and the Indianapolis 500. The Indy 500 is celebrating its centennial era after the inaugural race of 1911. Much has changed, but many of its traditions remain intact. Because of the race, May contains a lot of tradition, pageantry and speed. And, if we are lucky, sometimes late May has some NBA Playoff action. The events of May are a great analogy for talking to your clients about their retirement plans and future income needs. Teams are looking for speed, endurance and strategy throughout the month.
At the beginning of the month, the focus is on speed in order to qualify for the best starting position. Many of our clients retire with plans to travel, build new vacation homes, or start new businesses. These early retirement years require a lot of income, and sometimes, we need to look at the most tax efficient manner to fund these years. Positioning our clients for their best start requires planning and strategy for the 10-15 years prior to retirement. In the Indy 500, teams who don’t test regularly struggle with qualifying and end up starting at the back of the 33 cars. The turbulence at the back of the pack is incredible, so getting your clients near the front is critical. Provide them with options for retirement by having a different conversation about protection, guaranteed income levels, and diversifying the product portfolio.
After qualifying for Indy, teams begin looking for endurance. Drivers and machines must last a grueling 500 miles at speeds averaging 210-plus mph. Each team is provided the same amount of fuel and tires, and they must meet the same technical specifications. How they utilize the allowable resources throughout the race determines how they finish. We have to make sure our clients use their available resources appropriately and have a plan that will last for their entire life with certainty.
Finally, in the final 50 laps or so of the race, strategy plays a large role in determining who reaches the winner’s circle. Making sure our clients have multiple streams of income that they can’t outlive is only one part of winning their retirement race. One of the most overlooked needs in retirement planning is inflation protection. Today, interest rates are poised to increase at some point the next three to five years. Therefore, the ability to afford the same items and maintain a normal lifestyle in the future requires growing your income. It’s easier to grow income with the proper products than to grow your account balances above and beyond your withdrawal rate annually and consistently.
In order to win the retirement race, it takes planning, education, communication with your clients, and strong product selection. Let Ash Brokerage help you have a meaningful conversation with your clients and demonstrate new and innovative ways to secure your clients’ lifestyles during their different phases of retirement.
Whether your prospects are more concerned with “Making It” (accumulation) or “Taking It” (locking in the highest amount of retirement income) or both, recent innovations in Fixed Indexed annuities (FIA) can meet their needs.
Perhaps it sounds too similar to the inflammatory and divisive stereotype of the American public during a presidential election, but identifying where your prospects stand on the “Make It — Take It” scale can prove invaluable in leveraging recent product enhancements for FIA products.
FIA’s have been criticized recently for having caps that are “too low,” thus limiting earning potential. While caps are historically on the lower end, significant opportunity still exists.
A 50-year-old client, after a 10 years of accumulation, can lock in a 5.5 percent to 7.0 percent payout. (Selection based on single/joint, level/increasing payout at time income is taken – not at issue!) With a 20-year hold, the range increases from 8.5 percent to 10 percent.Many consumers are purchasing this rider primarily to lock in these percentage options.
A 60-year-old client, after a 10 years of accumulation, can lock in a 7.5 percent to 9.0 percent payout. (Again, selection based on single/joint, level/increasing payout at time income is taken—not at issue!) With a 20-year hold, the range increases to 9.0 percent to 13 percent.
This feature enables your prospect’s future guaranteed lifetime income to increase every time there is an index credit earned – even if the account value goes to $0. While this doesn’t mean guaranteed, annual income increases, it does provide for welcomed income increases periodically.
Allocating a portion of you prospect’s portfolio to a FIA with a combination of uncapped growth, uncapped growth with guaranteed increasing payout percentages and /or guaranteed lifetime increasing income, can provide your prospects with a cost-effective means to increase their comfort in retirement, be they “Makers or Takers.”
When you look back on your career in financial services, has there ever been a better time to be a financial advisor? Has there ever been a time when sound financial planning has been more needed than right now? Clients have access to more information, more analyses, and more financial opinions than ever before. The result? More confusion. More fear. More doubt as to which direction to take.
Just turn on your favorite financial network, and listen to the well-credentialed featured guest telling you exactly what to expect from the financial markets in the days ahead. The arguments are well thought out and convincing. But, after the next commercial break, a new guest is introduced … Equally credentialed. Equally compelling. The only problem is that this guest is making the exact opposite predictions for the future of the financial markets. Is there any wonder why clients are so confused and in need of your services more than ever?
When you recommend fixed and indexed annuities, your clients will appreciate having the opportunity to earn reasonable rates of return without having to worry about the preservation of their principal. In addition, when appropriate, you also can enhance the annuity value by adding a death benefit, a lifetime income rider, or a long-term care rider. In doing so, your clients can feel comfortable with the direction of their financial future.
There truly has never been a better time to be a financial advisor.
Recently, Mount Everest claimed 12 lives while Sherpas guided people toward the summit. It marked the deadliest day in the mountain's history, and 2014 is one of its deadliest years even though the climbing season has just started. Historically, most people lose their lives on Everest during their descent – not in their climb.
There are several risks associated with the descent. Fatigue is one of the biggest issues following the long climb to the summit. Falling behind the guides during the initial descent can lead to poor decisions or quick movements at high elevations. Descending too quickly creates a condition where fluid builds in the lungs. Ironically, most deaths have occurred within 8,000 feet of the summit during descents.
Financial professionals can use the descent of Everest as analogy for working with clients. They need to pay careful attention to several aspects of the process – they need to be attentive Sherpas, or guides. First, the initial parts of the de-accumulation of assets are most critical. Mistakes in the early years of changing to the income phase can produce serious ripples throughout retirement. Sequencing of returns plays a major role during these initial retirement years.
Second, clients tend to make quick decisions … usually because they haven't planned in the five to 10 years leading up to retirement. We must work with clients to reposition their assets to preserve and protect them in the descent from working years to retirement. One of the largest fears for most Americans is the transition from accumulating assets to depleting them.
Finally, we have to pay attention to our clients throughout retirement. The landscape fluctuates with rapid changes in market performance. We must keep our clients' best interests in mind and recognize that they prefer a steady income.
Annuities provide an income stream that creates steady, consistent income. They allow for the consistent disbursement of assets over a client's lifetime while averting one of their biggest fears – outliving their income. Taking away the risks of income early in retirement allows a planner to focus on longer-term asset growth to sustain inflation-protected income. Call Ash Brokerage for more details about helping your clients on the dangerous descent of retirement income planning.
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