Last Sunday, my wife asked me to go to the grocery store. She was studying and writing papers as she continues her education to become an ultrasound technician, so I agreed to shop if she provided me with a list. Having been recently married, it was different for me to buy more than hot dogs, Eggo waffles and bread. But I figured it out, and I found myself shopping the way most Americans do.
As I went methodically down the list, I wheeled my cart from aisle to aisle searching for each item. Once I found the paper towels, I looked at the brands and designs, then I made my decision. However, I found myself looking at the cost. It was clearly a better deal to purchase 12 rolls of paper towels instead of four. Without hesitation, I purchased the dozen – even though I didn’t need all of them now and the total cost was more.
Next, I found the facial tissue and repeated the same decision process: brand, design, cost per box. I’m now the proud owner of a dozen Kleenex boxes.
Here’s my question: Why aren’t we using the same process with our clients when it comes to retirement income? When you look at the options, the most efficient way to purchase income is to take advantage of discounted dollars and mortality credits. And, only one type of vehicle provides the advantage of mortality credits and tax-advantaged income distribution rules. Even though that purchase may be more in today’s dollars, it will likely outperform many traditional vehicles that possess volatility, sequence of return risk, longevity risk, and gain-first taxation.
It’s time to have a conversation about buying basics. If we’re willing to pay more for a larger supply of paper towels and Kleenex because we know we’ll need them later, there’s no reason we shouldn’t be doing the same with our income products. Most people are willing to spend a few extra dollars now to save more in the long run.
Ask your clients how they shop at the grocery store. If they’re willing to purchase additional items when they’re on sale, they’re likely to be receptive to buying income at a discount as well.
Buying income at a discount is no different than buying basic necessities. And, our income floor is a necessity that should be guaranteed. Make sure you’re showing your clients how they can buy in discounted dollars.
Mike McGlothlin is the Executive Vice President of Annuities at Ash Brokerage. His strength is helping advisors become more efficient and effective in their businesses. He and his team provide income-planning solutions focused on longevity and tax efficiency, and they also assist advisors with entering defined-benefit termination planning and structured settlement markets.
© 2018 Ash Brokerage LLC.