Why Your Clients Really Care About Guaranteed Income


Why Your Clients Really Care About Guaranteed Income

Recently, our division sponsored Wendy Boglioli as a speaker for one of our partner firms. I always enjoy being around Wendy. She is an Olympic champion swimmer, a long-term care advocate and a genuine professional. If you need a great, motivating speaker, I highly encourage you to consider Wendy.

 

During the event, Wendy spoke about how her swim coaches prepared her team for races. They were ready for anything to go wrong. And, a lot of things can go wrong:

  • The starting block might be slippery and you can get off the block awkwardly
  • Your goggles can fill up with water
  • You can be off a few inches on your turn at the wall
  • You can miss a breath due to the waves in the water 

 

The list goes on ... The same goes for financial planning. You have to plan for the unexpected. 

 

Personal Case Study

Guaranteed income creates a safety net for many unexpected events and economic conditions. I offer my own parents as an example. 

 

Over the last four decades, my parents have endured several cardiac events. Medical advances since my father’s first heart attack have lengthened his life expectancy, but possibly at the risk of the quality of his last years. Guaranteed income sources have allowed them to establish reserve funds for their escalating care need. 

 

I don’t think my parents thought my dad would live to age 88 when he retired before the age of 62. Dad’s company helped him bridge the gap between his retirement date and early Social Security income. Additionally, both my parents had pension plans they use to receive regular, guaranteed income. They wrap their government and pension payments with selected annuity payments from annuities purchased decades ago. Finally, they have a portion invested in equities and bonds to provide growth. But, Dad has received multiples of the cash balance in his pension plan with no care in the world about its rate of return or upside potential. 

 

That’s why annuities and guaranteed income are so important to Americans today. The use of mortality credits in annuities provides guaranteed income without concern for rates, market corrections and managing assets. 

 

Through the years, my mom and dad have been able to travel the world, manage their medical expenses and create a healthy standard of living. While their health care is largely an unknown in the future, the reality is that guaranteed income gives them an avenue for stability in a world filled with uncertainty. 

 

Winning Strategy

Take the time to look at how guaranteed income can fit into the portfolio for your next client. We find that 15-25 percent of a portfolio should generate guaranteed income to make it efficient. But, talk to your clients about what it will mean to them to be assured they have a consistent income regardless of portfolio performance. I think they will appreciate the value of guaranteed income.  

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of annuities at Ash Brokerage, he heads a team providing income planning solutions focused on longevity and efficiency. He’s also a thought leader who provides guidance and assistance for advisors and broker-dealers navigating marketplace and regulatory changes. You can find a collection of his blog posts in his book, “Above the Clouds … Winning Strategies from 30,000 Feet.”