Make a Game Plan to Remove Risks


Make a Game Plan to Remove Risks

As a former student basketball manager at Indiana University, I remember listening to Coach Knight talking to his assistants about strategy. Typically, the game plan revolved around taking away a strength for the opposing team – or taking away a risk to our team. Reducing a significant risk greatly increased our chances of winning. 

Why don’t we do the same with our clients?

Maybe we don’t know the risks for each client. After all, there are so many risks associated with retirement planning. In order to best serve our clients, we look holistically at tax consequences, cash flow, charitable and gifting strategies, survivor’s income protection techniques, and maximizing Social Security. Risk mitigation strategies like long-term care and life insurance are usually discussed, but not necessarily as urgently as they should. To a lesser extent, we address inflation, housing and health care concerns for retirees.  

All those risk are important; however, there is one risk that multiples all the above risks: longevity. If your clients run out of money, several things can happen at once: 

  • Cash flow becomes strained due to a reliance on government provided programs
  • Maintaining income to a survivor becomes nearly impossible with few alternatives, as past Social Security decisions can’t be changed
  • Long-term care (at the level of care the client deserves) becomes burdensome and creates emotional conflict due to the financial stress

One way to alleviate the exponential impact of any of these risks is to address longevity up front. Planning for a guaranteed, inflation-adjusted floor of income should be the cornerstone of any retirement planning strategy. Additionally, the risk of longevity can only be shifted to insurance products that provide income that you can’t outlive.

Regardless of net worth or total assets, your clients should never self-insure their longevity. Because the risk of longevity isn’t a singular impact. It’s a risk that impacts their entire net worth. 

Bottom Line: Make a game plan for eliminating your clients’ biggest risk by addressing longevity first.  Start their retirement income strategy with guaranteed, inflation-adjusted income with a life contingency. By taking longevity off the table, you increases your clients’ probability of success in retirement.

 

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.