Annuities

The 5 Scariest Facts about Social Security


Annuities

I read a lot about the retirement gap in America. There are some scary scenarios ahead for many people who have not committed to saving, investing or planning for income they can not outlive. But some of the scariest statistics that continue to bother me are those around Social Security. 

 

No, it’s not the fact that 78 percent of people believe Social Security will run out of money in their lifetime.1 Instead, it’s the complete lack of education that the financial services industry is providing to clients. That’s something we can control and change. 

 

Here are five stats you should pay attention to: 

 

As advisors, we must learn the complexities of Social Security and convey that knowledge to our clients. The planners who do so put themselves in a much better position for long-term success. Their client retention will likely be higher due to the information they provide while preserving their assets under management. 

 

Winning Strategy

Learn as much as you can about Social Security in the income planning process. Clients want advice on this complex benefit, and they clearly need to know more in order to make better decisions about their future income. 

Retirement Webinar

Craving More?

We talked with Jim Blair to tackle unique situations around Social Security your clients may be facing.

Watch the Replay Here

 

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. 

  

1Nationwide Retirement Institute, Social Security 4th Annual Consumer Survey, September 2017: https://nationwidefinancial.com/media/pdf/NFM-16735AO.pdf

2Center for Retirement Research at Boston College, “Trends in Social Security Claiming,” May 2015: http://crr.bc.edu/wp-content/uploads/2015/05/IB_15-8.pdf

Social Security Retirement Income Planning

The Hidden Impact of QLACs


Annuities

Soon after Qualified Longevity Annuity Contracts (QLACs) were created in 2014, we put them to the test in a vigorous study. And, we’ve repeated that study every year since. 

 

Here’s what we’ve learned: While QLACs continue to offer an incentive for pushing required minimum distributions (RMDs) out to age 85 and one month, there are other benefits to consider. In every year that we’ve done the study, a few key takeaways have remained consistent. 

 

  • QLACs improve retirement outcomes. In our 2018 study, we applied QLACs to four different traditional asset allocation strategies in four different age groups, using market projections from 35 investment advisors. Amazingly, a QLAC improved the probability of success in 100 percent of the scenarios we tested.1 In our earlier studies, when we used past performance of the S&P 500 and Barclay’s Aggregate Bond Index, QLACs improved the probability of success in 95 percent of scenarios. Regardless of projected or past performance, the placement of a QLAC has proven to be a great enhancement in nearly every asset allocation plan. 

 

  • Younger, more conservative clients benefit the most. In our analysis, the largest improvements have been in younger and more conservative client scenarios. We see significant improvements when a QLAC is placed at age 55 or 60 with an asset allocation of conservative and moderate-conservative. Too often, we look at QLACs as a tool to simply push RMDs down the road. But guaranteed income, i.e., not running out of money in retirement, is the bigger story. We often overlook the benefits of guaranteed income in portfolios and this study proves the positive impact.

 

  • Guaranteed income changes the conversation. If you’re not already looking at the value of QLACs – or other guaranteed income products – then you’re doing yourself a disservice. With our JourneyGuide™  software, we’ve discovered that guaranteed income not only changes the mathematical outcome of retirement, but it also changes your client relationships. With a tool like JourneyGuide, you can have meaningful, interactive planning sessions to show clients the positive impacts that small changes can have on their portfolios. In many instances, the implementation of guaranteed income allows the client to be more aggressive with their other assets. This adds advisor gamma to the relationship that would otherwise be lost. 

 

Winning Strategy

The hidden value of QLACs is guaranteed income. We’ve proven that regardless of allocation, the impact of guaranteed income is significant – even more so with younger investors. I encourage everyone to look at your younger clients and begin placing guaranteed future income in their portfolios. That will, in turn, allow you to have a conversation around their remaining assets or capture more assets and invest them more aggressively to maximize long-term growth potential. 

Retirement Webinar

Craving More?

We're talking with Jim Blair on May 17 to tackle unique situations around Social Security your clients may be facing.

Register Here

 

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, “2018 Study: QLACS Improve Probability of Retirement Success,” March 2018: http://bit.ly/2jN5a2K

QLAC Qualified Longevity Annuity Contract Retirement JourneyGuide

Shift the Risk, Not the Return


Annuities

Lately, I’ve spent a lot of time talking about pension risk transfers. I think it’s market that can explode over the next 12-18 months for any financial professional who is committed to talking to CEOs and human resources leaders. 

 

But, saving on premiums and taking a less valuable employee benefit off the table is only part of the benefit. The real benefit is the shifting of risk. Plan sponsors bear several risks that can be reduced or eliminated.

 

The Real Risks

Pension plan sponsors take on the investment risk of plan assets. Regardless of economic projections, managing risk will likely be more difficult within a plan for the immediate future. Rising interest rates will result in lower bond valuations. A choppy market will make it difficult to have steady returns necessary to hit funding targets. 

 

Life expectancies continue to increase in the United States. There is a requirement to pay the monthly income stated in the pension plan document. Regardless of how long the plan participant lives, the plan must meet that obligation. The problem is that the current funding status for many plans is below 100 percent, so the plan might not have enough assets to meet those obligations. 

 

The same problems exist for most retirees. They ask, “Do I have enough assets to generate the income that I need? And, will I live too long and exhaust those assets?” Unfortunately, business owners and leaders must answer that question for themselves, as well as for all their employees. The fact that business owners have an added responsibility for their employees’ retirement creates more stress and anxiety. 

 

Worth the Shift

These risks can be shifted through pension risk transfer. The process can be cost effective. It’s long, but it can be easy and seamless for business owners. There is little reason to keep risk on your balance sheet when there are alternatives. Unfortunately, most business owners don’t know about the options available to them. It makes a great conversation for you to have with business owners: Shift this risk, and you will gain the trust of the entire company. 

 

Winning Strategy

Shift the longevity risks for corporations in a similar fashion to individual retirement plans. Take away investment risks and the potential of living too long, and you’ll gain a corporate client plus all the employees.

Policy Review - 10 Ideas For Existing Life Insurance

Craving More?

Watch the replay of our webinar where we talk how pension risk transfers can be an effective tool for defined benefit plan sponsors seeking solutions for rising costs and longevity risk.

Watch Now

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement 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.”

Pension Risk Transfers Retirement Practice Management

Missing the Shot You Didn’t Take


Annuities

I can never resist talking basketball in the spring, especially around the NCAA tournament and the final stretches of the NBA season. 

 

For anyone who knows me, my recreational basketball skill set is focused on offense, not defense. Specifically, my game is played between the two 3-point lines. I usually don’t leave a game thinking I should have taken a shot but didn’t. A lot of coaches tell players that they will never make the shot that they don’t take. 

 

Recently, one of my best wholesalers posed a question to the rest of our sales team. He asked how often clients wish they had bought something a year ago but didn’t have the faith to make the decision. 

 

Think about how many people wish they had bought a few years ago. And, think about how many had wished they sold it while it was at an all-time high. That’s always the case – clients always wish they had done something a year ago.

 

So here’s my question: What will you wish you had done this year when you look back at your business next year? 

 

One Possible Answer

Pension risk transfer is an opportunity to drive revenue in your practice for 2018 and beyond. However, many are reluctant to pursue this market because it has a long gestation period before you receive revenue or commission. I think there are several reasons to evolve your financial planning practice to include pension risk transfers:

 

  • Current tax law allows companies to make deductible contributions to their 2017 pension shortage at the higher tax rate of 35 percent. This equates to a 14 percent discount for applying contributions to the pension shortage in 2018.
  • With our recent strategic partnership, Ash Brokerage can provide fee income to financial advisors before product is placed and while the company completes the termination process. 
  • More and more large companies are taking advantage of shifting pension risk to insurance companies. Small and midsized companies tend to follow larger corporations, and most pension assets rest with small businesses. 
  • Bond yields will likely change dramatically over the next 36 months, putting pressure on the fixed income portion of the investment portfolio. The same can be said for the recent volatility in the equity markets. It makes it difficult for plan sponsors to manage the risk for investment yields. 
  • Life expectancies continue to increase for older workers. That puts more obligation on the plan assets to provide lifetime income to the plan participants. That translates into more risk for the plan sponsor. 

 

Economic and tax climates make it a great time to talk about pension risk transfers. If you don’t begin integrating it into your practice today, you will likely look back a year from now and say that you wished that you done so. Don’t be wishing you had done something a year ago that is now costing you business. Take a good look at pension risk transfers as a larger part of your business. 

 

Winning Strategy

Don’t look back a year from now and wish you had added pension risk transfers to your business. The climate is ripe to take advantage of a business opportunity that might not come by again. 

Policy Review - 10 Ideas For Existing Life Insurance

Craving More?

Watch the replay of our webinar where we talk how pension risk transfers can be an effective tool for defined benefit plan sponsors seeking solutions for rising costs and longevity risk.

Watch Now

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement 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 Pension Risk Transfer Practice Management

How You Can Find More Clients with Pension Risk Transfer


Annuities

Our sales team talks with a lot of advisors over the course of our travels. Most conversations center around the need to grow the advisor’s business. 

 

As I’ve discussed before, part of The Go-Giver philosophy is the Law of Compensation: Your income is determined by how many people you serve and how well you serve them. Deploying this law through pension risk transfer sales can help you drive your firm’s revenue and increase the number of people you serve. 

 

Pension risk transfers will be a significant market over the next decade. For advisors, it’s a great way to meet new prospective clients through a business contact. It opens the door to a group of employees with the approval of the employee’s human resource department or company’s leadership. What a great introduction to new people! 

 

Companies of all sizes have pension liabilities that are at risk of hurting the enterprise. Pension plans carry longevity risk for the plan sponsors, interest rate risk for the pension fund managers and investment committee, and cost increases that concern C-suite leaders. When working on pension risk transfers, you can reduce or eliminate several problems for the employer:

 

  • Reduce a liability that shows up on the balance sheet (if not fully funded)
  • Avoid the increasing cost of administering the pension plan in the future
  • Shift the risk of employees living longer than funds can support payments
  • Eliminate the risk of interest rate fluctuations and equity market volatility 

 

There are several reasons that an employer would want a retirement income specialist in their office to talk with their employees about options on pension risk transfer decisions:

 

 

Pension risk transfers create a win-win-win scenario for the advisor, the employer and the employees. The employees gain the advantage of talking to a retirement expert on-site, which is viewed as an added benefit at no cost to the employer. The employer gains the ability to transfer their risk to an insurance carrier, and eliminate or reduce the risks to their balance sheet and cost structure of maintaining a pension plan. The advisor wins by helping more people and serving them better, which is the basis of the Law of Compensation.

 

Winning Strategy

Help more people and help them with their most complex problem – retirement. You can do both by working in the pension risk transfer market. 

Policy Review - 10 Ideas For Existing Life Insurance

Craving More?

Watch the replay of our webinar where we talk how pension risk transfers can be an effective tool for defined benefit plan sponsors seeking solutions for rising costs and longevity risk.

Watch Now

 

About the Author

Mike McGlothlin is a tireless advocate for the retirement planning industry. As executive vice president of retirement 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.”

Pension Risk Transfer IRA Annuities Retirement