Annuities

The Value of Tax Planning for Retirement


Annuities

When I look at our industry today, I see a lot of commoditization. Our clients are driving transparency and asking for lower fees with more service. This combination makes it difficult to sustain a healthy business model, whether you’re commission-based or advisory-based.

 

Asset allocation and rebalancing can be done online, which has driven down value in the eyes of the consumer. Now, you may provide exceptional service and other planning around asset allocation to add value, but the value of asset allocation has been driven downward.

 

What is the key to driving value and making sure that you can earn a sustainable revenue stream? Generally, you need to lead the pack for those services and products that consumers find the most valuable. Keep in mind that price is a dollar amount. Value is how the client perceives it in their own eyes.

 

Prioritize Your Focus

Understanding today’s retirees and developing strategies to deliver value in a few critical areas allows you to build a long-term, sustainable business model. A 2017 poll uncovered some of Americans’ greatest fears about retirement: 1

 

  • 71 percent worry about health care costs. Government health plans are means tested and based on Modified Adjusted Gross Income levels. It’s important to have a strategy for keeping costs at a minimum through proper taxable income planning.
  • 52 percent worry about future tax rates. Even with the Tax Cuts and Jobs Act, marginal tax brackets did not drop significantly. With Social Security and Medicare struggling financially past 2035, it’s easy to see a potential increase in taxes – payroll, FICA and income tax rates.
  • 81 percent worry about running out of money and having to go back into the workforce. Guaranteed income could help alleviate that pressure.

 

These three areas of service – health care, tax planning and guaranteed income – can provide significant lift for your business over the next few years. They are highly valued in the consumer’s eyes.

 

According to a report from Capital Sigma, comprehensive financial planning, which would include retirement income planning and health care planning, is valued at more than 50 additional basis points. Tax management is perceived to be 100 basis points in value to the consumer. Those two services are valued at 150 basis points, whereas asset allocation is perceived to have a value of just 28 basis points.2

 

To increase the value of your business and drive revenue through your firm, you need to meet the changing demands of the American population. People will always pay for value.

 

Winning Strategy

Think about what your clients want more and design your firm and practice around those ideas.

Winning Strategies

Craving More?

In this episode, Mike McGlothlin shares not one, but five Winning Strategies to create a tax-efficient retirement portfolio. These strategies will set you apart from the competition by adding value to your clients.

Watch Now

 

1American Institute of CPAs (AICPA) / Harris Poll, March 2017

2Capital Sigma: The Sources of Advisor-Created Value, 2016: https://www.envestnet.com/sites/default/files/documents/ENV-WP-CS-0516-FullVersion.pdf

 

 

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. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

Retirement Tax Planning Health Care Guaranteed Income

How to Double Your Clients and Double Your Business


Annuities

Everyone always asks my sales team if we support marketing initiatives like seminars, client events and mailing lists. We do in certain situations, but I’ve found those tactics to have limited upside and they are costly, even with sponsorship. 

 

To be honest, I think there’s a more effective way to grow your business – by capturing the next generation of your current clients. 

 

According to LIMRA, there are more than $489 billion of in-force annuity assets on the books of insurance carriers. These policies are not being annuitized for income and largely not being used for income rider usage. Many have accumulated for years and contain built-up gains that will be taxed at the beneficiary’s ordinary tax rate. We call that the ticking tax bomb. 

 

Defuse the Situation

You could wait for the IRS to strike as soon as your client is gone. Or you could take action to help their beneficiaries before it’s too late. 

 

One solution is to turn on tax-advantaged income for your clients who own these “untapped” annuities. The income stream is small and includes a return of basis, making part of their payment tax-free. When your client dies, the remaining cost basis may be stripped from the annuity in a lump sum or through payments. This allows their beneficiaries immediate access to tax-free cash. 

 

The remaining inheritance can be stretched over a beneficiary’s lifetime, which reduces the affect of taxation. Otherwise, a beneficiary would have to claim 100 percent of the remaining gain in the year of receipt or over five years from the date of the annuitant’s death. 

 

By putting the IRS in the back of the line, you will gain trust with your next generation of clients. This is a great way to grow your business. I encourage you to not only conduct regular reviews of your clients’ beneficiary designations, but also look at planning for the beneficiary’s inheritance. How they receive the money is equally important as the dollar amount. 

 

Winning Strategy

Double your business by doubling your clients through annuity reviews. If you look at how the distribution will affect the beneficiary and add value to their distribution, you will gain their trust and earn their business.

Retirement Webinar

Craving More?

We recently sat down with a few of our top Retirement Income Consultants to gather their perspective from the field. Watch how they helped their territory grow with tools and resources from Ash.

Watch 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. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

Retirement Planning Annuities In-Force Review Tax Planning Generational Planning