I think baby boomers are starting to get the message (at least at the conceptual level) of the need and costs of addressing longevity in retirement. Just watch 60 minutes of primetime network TV – you’ll see green lines, orange money, falling dominoes and some scolding from Tommy Lee Jones. See, you know exactly what I am talking about without me even mentioning the sponsors of those commercials.
If retirement planning were only that simple …
If longevity was the only risk to going broke in retirement, your job would be easy. But it’s not. Effective retirement planning requires getting inside your clients’ heads and hearts and learning their fears and concerns about what could cause them to run out of money.
The recently released AICPA CPA Personal Financial Planning Trend Survey has identified reasons why clients fear going broke (a relative term) in retirement.
The nuggets in this survey are the unexpected events clients were concerned about facing.
In addition to longevity, the concerns that fueled the fear of going broke in retirement include:
As a financial professional, one the biggest challenges you face helping clients articulate and identify their individual retirement concerns. Might I suggest using the above list to jumpstart the conversation?
The Bottom Line: In order to address your clients’ retirement worries, you have to dig deeper than the numbers. Find out what potentially troubling events concern them most – then find solutions to help calm their fears.
Standing at the edge of Erickson Bowl, elevation 12,480, in Keystone, Colorado, I was in awe. As I looked out on the summit at Keystone Peak, searching for a line to being my descent down the snow-covered mountain, the sunlight was blinding. I noticed the fresh smell of minty pine, and the view of pristine blue skies and crystal white snow took my breath away.
This is was a place of tranquility, but the atmosphere shifted quickly and the piercing cold wind was a shock to my face. I’d made the steep journey to the summit, but I stood there frightened about the possibilities of the suicide mission to return.
As I flew down at 60 miles an hour, I had to trust my equipment, my knowledge of the terrain and my technical skills. I veered right and left, avoiding trees and boulders that could potentially kill me in a second. It was a thrill, but a very risky thrill, and I couldn’t have done it without preparation.
Right now, your clients are at the mountaintop of a six-year bull market, and volatility has returned. They may feel uncertain and unprepared for the potential risks they face – inflation, health care and outliving their money. Do you know how to guide them through the terrain to safety?
The Bottom Line: You can enjoy the view from the top … but eventually, you’ll have to head back down from the summit. Ash Brokerage can help you mitigate risks and successfully navigate the retirement mountain. We’ll educate you on latest strategies and solutions to help maximize lifetime income while keeping your clients’ nest eggs intact.
Have you ever thought about the true cost of income? Too often, we simply take the current payout percentage and divide that into the required annual income to find a solution. But, are we really helping the client understand the cost of generating income? Or, are we even doing the client justice by simplifying the solution with the hottest income rider?
In reality, clients need to consider many factors as they transition from asset accumulation to asset consumption for the rest of their lives. As advisors, we must create a strategy that provides a minimum level of income the client will not outlive. So many of us stop after completing the simple calculation with an income rider. However, there are other considerations.
Planning to minimize the tax impact on income received has a collateral effect on other aspects of the income stream. For example, minimizing taxable income can assist with the taxation of Social Security through the compression of the Modified Adjusted Income calculation. Reducing taxation early in retirement may allow for bracket bumping with Roth conversions for qualified assets.
More importantly, we must deliver income that is adjusted for some level of inflation. Many say inflation is the cruelest tax of all. It is silent, you don’t feel it at any particular time of the year, and it is generally in small increments; but, over time, it will reduce the effect on a retirees buying power. While it is difficult to speculate where inflation will be in 10 or 20 years, there are ways to increase the minimum income level through cost of living increase riders on some products. This should be done on a guaranteed and frequent manner.
Finally, we must consider the impact of fees on the income stream. Too often, we look at a gross number for income. But, as I’ve said before, it’s not what you earn; it’s what you keep. A 1 percent fee on a portfolio earning 6 percent reduces the return by 17 percent. As we move to a more transparent environment, discussions with clients will become more important. They’re becoming knowledgeable about the impact of fees, so they will look for advisors who will help them keep more of their assets.
Client demand for advice and solutions will remain high, so there has never been a better time to be in the industry. However, we have to think about our efficiency and effectiveness in helping them generate income. Instead of reaching for the easiest solution available in an income rider, I challenge everyone to look at more options.
Bottom Line: Taxes, inflation and fees can cost your clients a lot of income. Look deeper for solutions to make the client’s income more efficient and effective during income distribution.
My seventh grade son played his first season of middle school basketball this year. To be honest, he didn’t play well and didn’t get as much playing time as he’d hoped. Instead of being discouraged, however, he continued to work hard and practice.
It’s paid off. He’s improved dramatically over the last month and he’s getting much more playing time with his summer team. It’s a great jumpstart for him because his summer coach will also be his eighth-grade coach next year.
With the large amount of baby boomers retiring over the next few years, it seems like the financial industry is also starting a new season. Advisors need to be focused on retirement income planning, but it will take a lot of work and practice to stand out in the crowd.
The Bottom Line: If you want to help your clients win, you’re going to need a good coach. Ash Brokerage can be there to help you train and improve. With hard work and practice, you can be your clients’ go-to resource for retirement income planning. Jumpstart your season with Ash Brokerage on your team.
In their lifetimes, your clients will own several kinds of insurance. For example, let’s look at Jim – a 45-year-old man who’s got a house, wife, two kids, a truck and a great job as an electrical engineer.
Like most people, Jim has health insurance through his employer – to help cover his family’s medical bills should they get sick or injured. He buys his home and auto insurance through his buddy Pete, a property a casualty agent in town. Pete also told Jim he should have life insurance – to replace his income for his family should he pass away prematurely – so he added that as well.
Jim’s feeling pretty covered at this point. But he worries about the future. He hopes to retire in about 20 years, but he wants to make sure he’ll have enough money to last – he doesn’t want to run out of income later in life.
Well, in a few years, Jim could consider another type of insurance: an annuity. Just as life insurance offers a benefit for a shorter-than-expected life, an annuity can offer income for a longer-than-expected life.
An annuity is a long-term product designed for retirement income – it’s a contract between a client and an insurance company. Jim, or other clients like him, can use a portion of their retirement fund to purchase a guaranteed stream of income – potentially for life.
An annuity could create reliable income for Jim, helping to fill the gap in his retirement income plan no matter how long he lives. Additionally, depending on the type of annuity he chooses, he may be able to access his contract value for long-term care needs should he need to, and/or a death benefit for his beneficiaries.
Bottom Line: Annuities are an insurance product – they’re insurance for your clients’ retirement income. Talk to Ash Brokerage about options to help them through this significant stage of life.
*Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company
For financial professional use only; not for use with the general public
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