Annuities

3 Tips to Simultaneously Protect Income and Legacy


Annuities

Planning for retirement and protecting a client’s legacy go hand-in-hand. You cannot pass along family wealth without adequate life insurance planning. And, your client will not be able to sustain a standard of living without proper longevity planning.

A retiree who lives off a systematic withdrawal strategy risks the chance of eroding their family’s wealth due to longevity-related issues. They might live beyond their planned life expectancy and need more income. There’s also a high chance of needing long-term care – a single event may cost several hundreds of thousands of dollars and wipe out anything to pass along to children or grandchildren.  

Strategies exist to both maximize your client’s retirement income and protect their family members using life insurance and lifetime annuities or pensions. At the end of the day, it just requires planning and preparation.

Here are three ways you can protect your clients’ income and legacy at the same time:

  1. Make the most of guaranteed income. Guaranteed income comes in many forms. I’m not just talking about annuities. Social Security and employer-provided pension plans are also sources of guaranteed income. It’s critical that you help your clients maximize each by carefully weighing their options. There’s no one-size-fits-all strategy. By maximizing income from these guaranteed sources, you’re lessening the burden on other assets to perform.
  1. Approach prospects earlier. Too often, I hear wholesalers and advisors talking about the right client to approach for retirement planning – they usually say late 50s or early 60s. In today’s economic environment, I think it’s younger than that. Americans’ retirement savings rate remains dangerously low. That has to change through education with advisors. The sooner you can get clients on the right track, the better. They’ll have more assets to work with, giving them more options for how – and when – they want to retire or pass on their wealth.
  1. Use non-correlated assets. Our studies have shown that withdrawal strategies using a non-correlated asset reduced the failure rate of retirement plans to just 2 percent – compared to 25 percent with a systematic withdrawal strategy.1 I think all your clients would appreciate increased confidence that their retirement and legacy plans will work.  

 

Winning Strategy

Use guaranteed income properly and in conjunction with life insurance to create holistic financial plans. Protect your client’s retirement income and their legacy at the same time.

Winning Strategies

Craving More?

As our population continues to age, risks increase due to longevity. And, longevity is the greatest multiplier of all the retirement risks. Join us along with Tim Ash as we tackle the opportunity in retirement!

Register Now

 

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. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

 

 

1Ash Brokerage, “QLACs Improve Probability of Retirement Success,” 2018: http://go.ashbrokerage.com/WC2018-03-12-RET-30007_LP-Content.html

Annuity Arbitrage: 3 Reasons it Works, Even with Low Interest Rates


Annuities

If you were to name the most discussed but underutilized idea in the life insurance industry, I think it would be the annuity arbitrage. In essence, you purchase an immediate annuity and use the payout to purchase another product, like life insurance or long-term care.

With low interest rates, many people don’t see the benefit of annuity arbitrage. But, today is the absolute best time to take advantage of this strategy. Here are three reasons why:  

  1. In today’s low-interest-rate environment, using nonqualified assets to purchase an immediate annuity provides the highest exclusion ratio we’ve seen in decades. The payout, which is heavy in tax-free income, allows the client to purchase more protection because more income is after tax. Also, the higher tax-free ratio affects government thresholds for Social Security and Medicare Part B less than other income-yielding instruments. Lower Medicare premiums could save clients in the middle-income brackets thousands of dollars.

  2. Many people believe low interest rates create a low payout, so they are waiting for interest rates to rise. This is a myth that will cost many Americans millions of dollars of income over their lifetimes. Interest rates make up only a small fraction of an annuity payout, with the majority of the payout being mortality credits. As your clients live longer, their mortality credits will decrease, making for longer, smaller payouts on immediate annuities.

  3. The cost of insurance will not get less expensive as clients get older. They will get less healthy and have fewer years to live. So, now is the perfect time to capture and lock in the costs of life or long-term care insurance. Not to mention, the cash value inside life insurance can be enhanced with the lowest possible cost of insurance. So, securing insurance now is the best option for future leverage.

At the end of the day, annuity arbitrage makes sense in many situations – not all situations. We have a lot of assets on the books of insurance carriers that aren’t being used for their full purpose. I encourage you to evaluate your book of business to see if there are assets available to pay for protection products in an efficient manner.

 

Winning Strategy

Look to understand the value of annuitization in today’s environment. Avoid the myths and focus on the facts.

Winning Strategies

Craving More?

As our population continues to age, risks increase due to longevity. And, longevity is the greatest multiplier of all the retirement risks. Join us along with Tim Ash as we tackle the opportunity in retirement!

Register Now

 

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. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

The Zone: Opportunity and Need


Annuities

Back when I worked as a retail financial services professional, every once in awhile I had one of those days when I was in “the zone.” You know the feeling – when everything you recommend is accepted and implemented by the client. Unfortunately, that feeling doesn’t come often enough.

When I was in the zone, I was prepared for presentations and had evidence why the clients should accept my recommendations. But, when I look back to my most successful days as a retail planner, I must admit two other factors were present: opportunity and need. When those two factors crossed paths, nearly everything was a slam dunk. 

I was most successful when a client clearly had a need they wanted to fill while, at the same time, they had the opportunity, or means, to sure up the gap. My sales were easier when those two factors existed, regardless of the time I spent preparing for the presentation or how good I was at selling that day.

The same potential exists for all of us when it comes to asset-based long-term care. There has never been a bigger opportunity or greater need to protect families and their wealth. With the opportunity and need intersecting for this generation and the next several generations, we can stay in “the zone” for several decades.

The Need

  • There is a 69 percent chance that a 65-year-old couple will need long term care during retirement1
  • Approximately 11 percent of the U.S. population has secured individual long-term care insurance 2
  • That means 89 percent of Americans are completely unprotected from a potential long term care event2

 The Opportunity

We still have $471.1 billion of annuities on the books of insurance carriers that are not being used for income or annuitization.3 They were purchased for an emergency like long-term care. Those annuities – variable, fixed and indexed – all have embedded gains that will create taxable distributions either at death or during retirement. What better use of those dollars than to provide tax-free benefits?

By exchanging an old nonqualified annuity to purchase an asset-based long-term care annuity, you could continue the tax-deferred growth. And, if the asset is used for a long-term care event, the basis and the gain are returned tax free.

Get in the Zone

There is nothing better than turning tax-deferred gains into tax-free benefits for clients. The opportunity exists and the need is huge. But, you need to recognize the crossover before someone else does.

Winning Strategy

Look for moments when opportunity and need cross over. Now is one of those times with asset-based long-term care.

Winning Strategies

Craving More?

As our population continues to age, risks increase due to longevity. And, longevity is the greatest multiplier of all the retirement risks. Join us along with Tim Ash as we tackle the opportunity in retirement!

Register Now

 

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. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

 

1LongTermCare.Gov, “How Much Care Will You Need?”: https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

2Forbes, “Who Owns Long-Term Care Insurance?”: https://www.forbes.com/sites/howardgleckman/2016/08/18/who-owns-long-term-care-insurance/#3e4566b62f05

3LIMRA Secure Retirement Institute, Retirement Fact Book, 2018

Distribution and Disappearance


Annuities

Annuity sales are shifting, and the direction is concerning.

 

At a recent industry event, where annuity sales executives came together to learn and share with each other, we went over a lot of statistics. One chart in particular was alarming.1

 

Annuity-Sales.jpg

 

Between 2015 and 2017, the annuity industry shrank by $29.3 billion in overall sales. The shocking part is that income annuity sales lost more than $34 billion. Some of that loss may have been due to many variable annuity carriers not issuing living income benefit riders, as rich as those riders were earlier in the decade. However, we’re still in the baby boom retirement era – the same 10,000 people per day transitioned from the workforce to retirement during that time.2

 

I have to ask …

  •         Have we forgotten the value of guaranteed income?
  •         Is the accumulation sale just easier for us to move assets?
  •         Why do we not sell the benefits of mortality credits on a regular basis?

 

The troubling part is that a corresponding influx of other income-producing assets does not exist. When I spoke with the research firm, they had no explanation where these assets have gone.

 

When looking at opportunities, I look to where the pendulum is likely to swing next. We have the largest transition from the workplace happening while life expectancies continue to grow. There has never been a greater need for guaranteed income that can’t be stopped until the retiree passes away. There has never been a better time to get ahead of the pendulum – talk to clients about the benefits of income riders and income annuities.

 

Winning Strategy

Fill a gap for your clients. Talk to them about the overall benefits of using guaranteed income products in their retirement portfolio. Statistics tell us that the competition isn’t talking about them.

Winning Strategies

Craving More?

In this episode, Mike McGlothlin shares not one, but five Winning Strategies to create a tax-efficient retirement portfolio. These strategies will set you apart from the competition by adding value to your clients.

Watch Now

 

1Source: LIIMRA Secure Retirement Institute, U.S. Individual Annuities survey, VA GLB Election tracking survey and Indexed GLWB Election Tracking survey; analysis is of retail individual annuity market and excludes employer plan and structured settlements.

2Pew Research Center, “Baby Boomers Approach 65 – Glumly,” December 2010: http://pewrsr.ch/T4o2Hs

 

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. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

Retirement Annuities Guaranteed Income

The Value of Tax Planning for Retirement


Annuities

When I look at our industry today, I see a lot of commoditization. Our clients are driving transparency and asking for lower fees with more service. This combination makes it difficult to sustain a healthy business model, whether you’re commission-based or advisory-based.

 

Asset allocation and rebalancing can be done online, which has driven down value in the eyes of the consumer. Now, you may provide exceptional service and other planning around asset allocation to add value, but the value of asset allocation has been driven downward.

 

What is the key to driving value and making sure that you can earn a sustainable revenue stream? Generally, you need to lead the pack for those services and products that consumers find the most valuable. Keep in mind that price is a dollar amount. Value is how the client perceives it in their own eyes.

 

Prioritize Your Focus

Understanding today’s retirees and developing strategies to deliver value in a few critical areas allows you to build a long-term, sustainable business model. A 2017 poll uncovered some of Americans’ greatest fears about retirement: 1

 

  • 71 percent worry about health care costs. Government health plans are means tested and based on Modified Adjusted Gross Income levels. It’s important to have a strategy for keeping costs at a minimum through proper taxable income planning.
  • 52 percent worry about future tax rates. Even with the Tax Cuts and Jobs Act, marginal tax brackets did not drop significantly. With Social Security and Medicare struggling financially past 2035, it’s easy to see a potential increase in taxes – payroll, FICA and income tax rates.
  • 81 percent worry about running out of money and having to go back into the workforce. Guaranteed income could help alleviate that pressure.

 

These three areas of service – health care, tax planning and guaranteed income – can provide significant lift for your business over the next few years. They are highly valued in the consumer’s eyes.

 

According to a report from Capital Sigma, comprehensive financial planning, which would include retirement income planning and health care planning, is valued at more than 50 additional basis points. Tax management is perceived to be 100 basis points in value to the consumer. Those two services are valued at 150 basis points, whereas asset allocation is perceived to have a value of just 28 basis points.2

 

To increase the value of your business and drive revenue through your firm, you need to meet the changing demands of the American population. People will always pay for value.

 

Winning Strategy

Think about what your clients want more and design your firm and practice around those ideas.

Winning Strategies

Craving More?

In this episode, Mike McGlothlin shares not one, but five Winning Strategies to create a tax-efficient retirement portfolio. These strategies will set you apart from the competition by adding value to your clients.

Watch Now

 

1American Institute of CPAs (AICPA) / Harris Poll, March 2017

2Capital Sigma: The Sources of Advisor-Created Value, 2016: https://www.envestnet.com/sites/default/files/documents/ENV-WP-CS-0516-FullVersion.pdf

 

 

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. You can get his latest book, “Winning Strategies: The New Rules of Retirement Planning,” on Amazon.

Retirement Tax Planning Health Care Guaranteed Income