Annuities

Why Your Clients Really Care About Guaranteed Income


Annuities

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.”

Retirement Guaranteed Income Annuities

Why Annuity Awareness?


Annuities

These days, it seems there is a holiday for every event and every little occasion. At times, I think because everything is a higher priority moment, then nothing is important in this world any more. The financial service industry is no different, with several months highlighting products throughout the year. 

 

That said, June is Annuity Awareness Month. While I’m biased as an income planning specialist, I think it’s important to highlight why annuities are so important to consider with clients.  

 

A recent ThinkAdvisor article1 highlighted the growing number of people aging to 100 … 

  • In 1900, only 31 people out of 100,000 had reached age 100
  • In 1999, that number grew to 1,471
  • As of 2010, that number exceeded 1,900, making a 25 percent increase in just the last decade

 

We have more Americans living longer than ever before but our savings and wealth has not changed significantly to keep pace with the longer life expectancies.  We must add guaranteed income to our plans to protect against living longer than expected.  

 

Need More Reasons?

Except for high inflationary times or around the financial crisis, the American savings rate has been in a steady decline over the past 40 years. The result is a median account balance of $130,100 for trailing baby boomers (age 50-59).2 This puts our industry in a position where we need to create more income from fewer assets than ever before. Mortality credits associated with annuities can boost yields and incomes to help close the gap. 

 

Due to means testing in health care premiums, longevity concerns become more critical in client discussions. Tax efficiency in Modified Adjusted Gross Income and Combined Income levels can reduce premiums by 20-30 percent at different tax brackets. Managing the tax burden on income with tax preference items like annuities can be beneficial to clients paying health care premiums to the government.  

 

In addition to general health care, long-term care can’t be ignored as a longevity risk. Asset-based long term care provides the opportunity to take existing tax-deferred annuities and create tax-free distributions when the client needs them most. As planners, we must do a better job of matching the asset with the potential need in the future – not just the funding, but the taxation of the benefits.  

 

Be Aware of Your Practice

Too often, we get stuck in the same sales process and product mix. Use Annuity Awareness Month to look at ways to better leverage annuities with your clients. Take the time to find out how annuities can work in the best interests of a client or prospect. Our economy and demographics are changing, and we need a fresh look at solutions that will make a difference for Americans. 

 

Winning Strategy

In June, look for ways to use annuities in your financial planning practice. Whether you’re looking to close an income gap, create more tax efficiency, fund long-term care, or just provide more stability, give annuities a chance to prove their value.  

 

Learn More

1ThinkAdvisor, “Life Expectancy Holds Steady, but Not for 95-Year-Olds,” http://www.thinkadvisor.com/2017/04/12/life-expectancy-holds-steady-but-not-for-95-year-o

2LIMRA, “Fact Book on Retirement Income 2016,” https://www.limra.com/bookstore/item_details.aspx?sku=23518-001

 

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.”

Annuities Retirement Financial Planning

Why You Should Be Optimistic About the Future


Annuities

While you might be afraid of the fiduciary rule and its effects on your business, there are so many reasons to be optimistic about the future of our profession right now. Below is a list of just a few of the changes I believe will continue to impact our industry – and increase the need for quality financial professionals – for years to come.  

 

Defined Contribution Plans

Defined contribution plans offer better choices, potentially lower fees, and tax-favored investing. However, few plans have mechanisms to provide lifetime income, so the vast majority of Americans need advice on converting their accumulated wealth into sustainable income. The loss of guaranteed income places pressure on assets under management like never before. The planner who can specialize in income planning can differentiate themselves for decades to come. 

 

Savings Rates

For long-term retirement savings, the savings rate in the United States remains around 5 percent, and baby boomers have a median retirement account balance of $130,100, according to LIMRA’s 2016 Retirement Fact Book.1 This means as planners, we will be challenged to generate more income with fewer assets than ever before. Clients will value creative and innovative professionals much more than a computer program to solve this problem. 

 

Social Security

More than half of Americans take Social Security early – only 2 percent of men, and 4 percent of women, defer their income to age 70.2 That behavior tends to cost retirees as much as a 56 percent difference in income at age 70. With Social Security having an inflation factor, the income discrepancy will grow more during retirement. Advisors who can provide meaningful advice on maximizing income will separate themselves from the pack. 

 

Health Care

Health care is the largest inflationary risk for elderly Americans. The uncertainty around premiums, coverages and providers means that planners must have a conversation about who, how and where will health care be provided during retirement. Knowing this and providing quality advice on health care will become more important as baby boomers grow older.  

 

Housing

In the United States, housing wealth is larger than all of the assets under management for both qualified and non-qualified assets. More importantly, many Americans need to downsize or rightsize their housing plans in retirement. Solutions around the proper use of housing wealth and housing lifestyle will only grow in importance as our clients transition from a working career to retirement. 

 

These are just a few of the demographic and social concerns our industry faces as this generation heads to an unknown retirement. Few, if any, of these concerns are likely to be answered by a computer screen and an algorithm. Instead, these issues are real life concerns that need to be discussed, weighed, informed, and addressed with a meaningful and purposeful process. I am confident our profession is well positioned for success for the next several decades. 

 

Winning Strategy

Look at all the demographic and social changes around us today. These changes will influence many of our clients and prospects for several years to come.  If you can address these problems, you are likely to gain market share in your business. 

 

Learn More

The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.

Download the e-Book Here!

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.”

 

1LIMRA, Fact Book on Retirement Income 2016: https://www.limra.com/bookstore/item_details.aspx?sku=23518-001 

2The Motley Fool, “When Does the Average American Start Collecting Social Security?” April 19, 2016: https://www.fool.com/retirement/general/2016/04/19/when-does-the-average-american-start-collecting-so.aspx

 

Retirement Longevity Financial Services

Racing Toward Retirement Success


Annuities

When you grow up in Indianapolis, you naturally follow racing to some degree. I’m not a huge racing fan, but I do follow the sport. (Actually, I follow just about any sport offers an opportunity to make an analogy with our industry.) 

 

As Memorial Day and the 101st running of the Indianapolis 500 approaches, I thought I’d share some statistics from the first race of this year’s IndyCar Series.  

 

For the St. Petersburg race, the winning margin was just 10 seconds. Now, on a race track, 10 seconds may seem like a massive win for the first place car. But, think about how narrow that margin really is over the entire race, when things could have gone wrong at any point ... 

  • There were 110 laps with multiple turns both right and left
  • The teams had to complete three pits stops
  • The drivers had to make hundreds of gear shifts

 

The timing of all of the above had to be near perfect in order to win because the next competitor was just 10 seconds behind. With any loss in momentum, the driver could have easily lost the race. 

 

Winning the Retirement Race

Just as anything can happen in 100-plus laps of an IndyCar race, you can never know what to expect in a 20-30 year retirement span. Both inflation and long-term care pose serious risks to our clients’ plans. Without a strong plan and skilled execution, they could easily be thrown off track.    

 

Our clients need to think about all the twists and turns their retirement might bring. And, we need to make sure their incomes don’t lose momentum. We need to make sure they’re able to finish strong. QLACs, deferred income annuities, income riders, and hybrid long-term care plans are just a few of the recent innovations that allow us to help our clients complete the race.  Because in their race, it’s either first … or last.  

 

Winning Strategy

Look at ways to protect your clients from inflation and longevity concerns.  Clients have to complete a long race that includes dangerous turns, a few pit stops, and the need to maintain momentum for the long haul.   

 

Learn More

The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.

Download the e-Book Here!

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.”

Annuities Longevity Retirement

Longevity for Your Practice


Annuities

You likely spend a lot of time talking about the importance of longevity planning for your clients. But, have you thought about longevity for your practice? 

 

Recently, I was reading an article from a practice management expert who was answering some questions about an advisor’s succession planning. It made me think how prepared we are as an industry to provide ongoing service to our clients in the event of catastrophic events. We talk to our clients about mitigating risks in retirement, but we don’t necessarily talk about the risk of losing an advisor. 

 

I think it’s an important consideration for us to evaluate, especially now. Part of working in your clients’ best interest might include having a strategy for your office to make sure you continue servicing your clients after you leave the business – by your own choice or due to an external event. Think about how you would feel if you put your entire trust into a relationship with someone, and then that person suddenly left. Wouldn’t you feel better if you knew there was a plan in place to continue taking care of you? 

 

Sound Familiar?

This article focused on several mid-50s principals who did not have official succession plans. Children were going to step into the businesses if a health event forced the principals out … However, neither the staff nor the clients were aware of these plans. The children probably were not aware of his plans either, given that they had successful careers elsewhere. Unfortunately, this scenario is common among financial professionals. 

 

With our clients in focus, we must have better plans for our retirement – which might come tomorrow due to a health event, or in a few years due to a simple desire to slow down. Regardless of timing, you owe it to your clients to give thought to the consequences. You also owe it to your employees, your families, and the industry.  

 

Look in the mirror and ask yourself, “Have I created a full, holistic plan for the orderly transition of my business? And, is it up to date?” If not, you need to devote time and energy to helping yourself first, so you can impact more clients and prospects with confidence. 

 

Winning Strategy

Think about how you will exit the business. What would your clients think if you were not at your firm tomorrow or the next day? You need to plan for the orderly transition of your business so you can instill confidence in your clients and communities.  

 

Learn More

The marketplace is demanding financial professionals to work in our clients' best interest, which will not only need to address retirement income, but also the risk of longevity.

Download the e-Book Here!

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.

Longevity Practice Management Succession Planning