Annuities

A Winning Perspective on Losing


Annuities

I was watching the Super Bowl on a business trip in 2017 when the New England Patriots made their famous comeback from 28-3. The people sitting around me were saying, “This game isn’t over” and “Brady is going to win.” I was struck by their incredible confidence, even as the Patriots fell behind by 25 points. In part, confidence comes from having a plan and the experience to execute it.

Recently, some of my favorite teams have been giving me the opposite feeling. We’ve all been there: that sinking feeling when our team is behind, with little confidence in the firepower on the bench to bring your team back. The team lacks the talent to compete. The coaching staff is not equipped to make the necessary calls. You look for anything to hold on to hope – if the team could just work that much harder or the coaches could lead that much better.

But as the game progresses, the pit in your stomach grows. The seconds tick down, but the team never catches up. Once the clock finally runs out, it’s almost more relief than a disappointment – at least the anxiety you felt as the seconds ticked away is finally over.

The final countdown makes a great metaphor for retirement planning. You begin your retirement game when you transition out of the workplace. The score is 0-0. By the time you reach the first 10 years of retirement, you begin to realize that you can’t buy the same things that you could when you first retired. By the time you get to your late 70s, it’s clear your assets won’t catch up to your total income needs. That same hopeless feeling hits the pit of your stomach. Your assets can’t work any harder because you can’t take the volatility.

As those assets diminish, it’s like the clock ticking down in the final minutes of the game, knowing the inevitable is about to happen – a loss. The anxiety leading up to the loss is just as strong. You are trying everything to stop the inevitable, but you know it is going to come. But it doesn’t have to be that way. Unlike sports, every American should be able to enjoy a successful retirement.

How do you do that?

You must understand the risk of longevity with your clients and address it. If you don’t, you put your client in a position of a potential loss. They are relying on your expertise to create a plan and execute. Make sure there’s a source of guaranteed income so your clients have confidence that they won’t have to stage a comeback – they’re already set up for the win.

Winning Strategy

Learn about how to transfer the risk of longevity to vehicles and implement those strategies. Give your client confidence they can win the retirement game.

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. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

Confidence Longevity Retirement

Longevity: The New Three-Legged Stool


Annuities

Many people talk about financial security as a stool that has three legs. All three must be present in order to achieve financial success – protection, accumulation and income.

However, longevity presents its own three-legged stool. I didn’t think about it until I read the 2012 International Monetary Fund (IMG) Global Financial Stability Report. The report dedicated an entire chapter to longevity at three levels – individuals, government and corporate.


Impact on Individuals

I’ve written a lot about longevity in the past, but let’s recap. Life expectancies continue to increase – even as more and more studies show a decrease for the first time in several decades. It’s causing a looming retirement crisis in the United States, largely due to individuals understating their own life expectancy. More people will rely on Social Security as their sole source of income than ever before. Scary. But even more alarming is the impact longevity has on government and corporate plans.


Impact on Government

The government’s ability to provide minimal guaranteed income will be pressed by increasing life expectancies. In this study, just a three-year increase in life expectancy will equate to a 50 percent increase in the costs of aging for advanced economies. These new assumptions might prove devastating. In the United States, the Social Security Trust Fund is already close to expected payouts exceeding revenue. As this line is crossed, mitigating longevity risk at the government level might be more challenging than at an individual level.


Impact on Corporations

For corporations, balancing mortality risk in their pensions seems straightforward. Billions of dollars are transferred from corporate pension funds to insurance carriers using Pension Risk Transfer techniques. But with an aging worker population, the report indicated businesses could see as much as a nine percent increase in costs due to longevity. Investors will eventually see these additional costs reflected in stock valuations. And, there is a potential negative impact on valuations due to the unfunded, increasing liabilities associated with longevity and guaranteed incomes.


The New Three-Legged Stool

The three-legged stool holds true for longevity at the government, corporate, and individual levels. You must address the risks of lower Social Security, unfunded pension liabilities and individual shortfalls with your clients. Understanding these risks is necessary to have a complete and meaningful conversation with your clients.


Winning Strategy

Make sure your client is aware of the choice in government benefits and corporate pension options. These contingencies play an important role in the individual planning process.



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. His latest book, “Free Throw for Financial Professionals,” is available now – learn more at www.freethrowsforpros.com.

longevity individual corporations government