Annuities

3 Ways to Protect Against Inflation in Retirement


Annuities

More Americans are living to age 100 than ever before and the number continues to grow. If you are looking at separating yourself from the competition, you must address the impact of inflation on both income and assets for your retirees.

Some people consider inflation to be the cruelest tax of all. It slowly eats away at the value of the dollar over time. Most people don’t feel it year-by-year. But at some point in the future, the client will wake up and say they can’t afford the same things they did at the beginning of retirement. That’s on us.

One of the best strategies to protect income erosion is to maximize guaranteed income streams that have inflation protection. Below are a few examples.

  1. Social Security – This income stream has a built-in inflation hedge with annual increases tied to an index reflecting consumer price increases. If you position Social Security correctly, and leverage its growth past Full Retirement Age, the higher income grows with the index. This provides a higher likelihood that the retiree will be able to afford the same things in 20 years that they do today.
  1. Guaranteed Income Annuities – With any asset that you control, you can leverage the power of guaranteed income options available on some annuities. It’s important to realize that any person should limit the amount of funds that go into annuities to the proper allocation. If too much of a person’s assets go into a conservative vehicle like annuities, it can actually decrease the probability of retirement success.
  1. Inflation Riders – Several income riders can provide increases tied to the underlying index. Single-premium annuities have options for a guaranteed 3-5 percent inflation adjustment. You need to understand the client’s risk tolerance before deciding which solution is appropriate for them. Maintaining control is an important aspect with many clients that should not be overlooked.

Regardless of the solution you provide for inflation, make sure you don’t make your client sacrifice their standard of living due to loss of buying power.

 

Winning Strategies

Protect clients from inflation. Make sure not only their assets but also the income streams increase with inflation during retirement.

Winning Strategies

Craving More?

Catch the latest Winning Strategies video where Mike dives into risks in retirement!

One of the largest risks in retirement is a long-term care event.Mike shares two winning strategies you can implement as an advisor to help clients make it through retirement with confidence.

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

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How to Put Old Annuities to Work


Annuities

I’ve said it before, and I’ll say it again: One of the easiest ways to secure your clients’ retirement success is by addressing long-term care.

The cost of extended care continues to escalate. And it will continue to climb as Americans live longer and the demand for care increases. If you’re not protecting against this risk, you’re doing you and your clients a huge disservice.

Today, there are more than $471 billion of annuities on the books of insurers.1 Rarely do our clients annuitize these older annuities, and the utilization rate for income riders remains low. Both of these facts make me think that many people purchased these fixed and indexed annuities for a future need or emergency. If that is the case, why not apply the annuity for the specific purpose of covering emergencies?

Under current tax law, annuity owners are allowed a tax-free exchange between annuities under certain circumstances. The contract being exchange and purchased must have the same owner and annuitant and considered like-for-like. If the exchange meets that criteria, the embedded gains (deferred interest) may continue to be deferred in the new contract being purchased.

With the Pension Protection Act, there is a new level of tax-free status with nonqualified annuities. When the client has a qualifying long-term care event, proceeds from the annuity are received tax-free. That includes the carrier’s funds as part of the long-term care insurance, the original principal (cost basis), and all the deferred gains in the contract. Older contracts like variable annuities, fixed annuities, and fixed indexed annuities qualify for this exchange treatment and potential for tax-free distributions due to long-term care.

Your clients’ needs change over time. You routinely adjust their asset allocation with market conditions and changes in risk tolerance as they age. You can also change the purpose of their existing annuities to match their current purpose.

Take a look at your existing book of business. Or, ask about a prospective client’s annuity holdings. It’s likely to make a lot of sense to your clients to re-purpose some of their assets in order to create leverage and tax efficiency.

 

Winning Strategy

Turn old assets with tax-deferred gains into tax-free distributions for long-term care event. The transaction is easy to complete and benefits many who are holding older annuities for an emergency.  

Winning Strategies

Craving More?

Across the country, advisors are telling us they’d love to find a steady stream of clients. Well, more than $3 trillion in pension assets are ready to move to either insurance carriers or employees in the next two decades. So, with the right approach, pension risk transfer can provide sustainable growth for any financial services firm.

Join us for a powerful webinar featuring Pension Risk Transfers in today’s financial world.

Catch the Replay!

 

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.

 

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1Insured Retirement Institute Fact Book 2018, 17th edition: https://www.myirionline.org/research/research-detail-view/iri-fact-book-2018-17th-edition-(single-license-download)

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Get Me Within Two Baskets


Annuities

It was the 1987 NCAA Regional Finals. We were playing Louisiana State University, and with less than 8 minutes to go, we were down by 8 points. For the first time in Indiana’s run to the National Championship, you could feel a little doubt that we would dig ourselves out of this particular hole.

During a timeout, Coach Bob Knight didn’t make any major adjustments. He reminded the team to do what we had been working on since the beginning of the season. We just had to do it with more accuracy and precision during the final minutes at the game.

Before they left the huddle, Coach looked the players in the eye and said, “Get me within two baskets with two minutes to go, and I will win this game for us.

Now, you may think that’s an arrogant statement. I don’t. I find it confident. Spoiler alert: As you’ll read in my book, “Free Throws for Financial Professionals,” Coach delivered on his promise. You can deliver on your promises, too.

Coach Knight’s statement demonstrates the leadership that all of our clients want from us. That statement is exactly what every prospective client wants to hear from their planning: Get me to the finish line and show me how to win.

Professor William F. Sharpe indicated that retirement income planning was the hardest problem he ever worked on during his career. I would argue that it’s the most complex problem that your clients will ask you to solve for them. That’s why you need to look at it differently.

Just like Coach Knight said in that timeout, you don’t have to do a bunch of new or different things. You just have to perform with accuracy and precision. You have products and tools available to shift a multitude of risks in retirement. You just have to do the fundamentals better. And, no matter what happens, you have to look your clients in the eyes and help them win.

Winning Strategies

Craving More?

Across the country, advisors are telling us they’d love to find a steady stream of clients. Well, more than $3 trillion in pension assets are ready to move to either insurance carriers or employees in the next two decades. So, with the right approach, pension risk transfer can provide sustainable growth for any financial services firm.

Join us for a powerful webinar featuring Pension Risk Transfers in today’s financial world.

Catch the Replay!

 

Winning Strategy

Get your client in a position to win with tools and products that have been around for decades. Think about using them differently to maximize success.

 

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.

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Strategies to Grow Your Client Base in 2019


Annuities

It’s hard to believe it’s time to plan for next year already. You might think it’s early, but completing the planning process now, at the start of the fourth quarter, gives you an advantage in a couple of ways. First, you can start changing your habits so you hit the ground running on Jan. 1. And, when you have more time to think about your business instead of work in your business, you tend to make better decisions.

 

One decision you should consider in 2019 is how you will grow your client base. Gaining clients is always a challenge for planners. It was a challenge at the start of this industry. It’s a challenge today. And it will be a challenge in the future. Why? Here are three reasons:

 

  1. Your competition is only growing. When prospective clients search Google for financial planning, they will find millions of wealth managers and online tools to help them make more informed decisions. Many of those resources are very inexpensive and easily accessible via technology.

 

  1. Consumers don’t wake up needing financial planning services. They have their sights on other tangible purchases and plan for retirement less than they plan for vacations.

 

  1. Our industry works on the most complex problems for our clients: retirement and longevity. There are so many potential solutions and changes during a 20 to 30-year retirement that clients become frustrated with the planning process. It doesn’t help that it’s very hard to do business in the insurance industry as a whole, due to regulations and paperwork.

 

No matter the challenge, acquiring new clients is the single most costly activity in your business. Which is why you should focus on ways to make it better.  

 

One of the more efficient ways to attract clients is to look deeper within their family – they have a higher trust factor because they know someone working with you. Marketing to family members might provide a better return than investing in mail campaigns, seminars or referral materials. Remember, billions of dollars will transfer from one generation to next over the next two decades, so you’ll want to follow those assets.

 

In order to connect with the next generation and start your relationship on a positive note, here are some ideas you should consider implementing as part of your marketing strategy next year:

 

  • Beneficiary reviews on all life insurance, annuities and Individual Retirement Accounts (IRAs). There are so many horror stories around the lack of a proper beneficiary designation that causes family strife, unintended tax consequences and funds going where they are not supposed to go.   

 

  • Harvest the cost basis on nonqualified annuities. While the tax law reduced the tax brackets, passing an annuity with embedded gains to the next generation forces the beneficiary to pay higher taxes at time of receipt. There are mechanisms to obtain the cost basis first and the gain second, which is completely opposite of most death claims in annuities.

 

  • Pass along family values with family wealth. Establish an income stream for the life of grandchildren that includes handwritten notes from the grandparents at special birthdays or events. You can gain a deeper understanding of the family dynamics by having this conversation.

 

So, if you want to increase your clients next year – and everybody does – consider looking within your existing base. Develop a specific marketing strategy to consistently and thematically talk with your clients about adding value for their family.

 

When you deliver value, relationships tend to follow – like lightning and thunder.

 

Winning Strategy

Look inward first. Your existing clients can provide the key to future growth through their children and grandchildren. Develop specific marketing strategies around the value you can bring to their entire family.

 

Winning Strategies

Craving More?

Face it. These days, your phone changes faster than you do. Continuous improvement is the name of the game. If you’re standing still, you might as well be walking backward.

Special guest Scott Fergusson joins us to talk all things innovation and how you can easily upgrade your business. Not just to keep up with the industry, but to get ahead of your competition

Catch the Replay

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,” will be available in October.

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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