Annuities

Income, Income, Income


Annuities

As I write this, I’m traveling back from an industry meeting that my company sponsors. Being a numbers guy, I always enjoy hearing how the year unfolded, best practices in technology, and where sales increased and to what degree.

However, one of the disturbing trends that I noticed is our industry’s lack of focus on the best benefit of annuities: income.

In 2017, the industry lost $30 billion in sales that involved income, according to LIMRA. That trend continued in 2018. Economic conditions are the most likely reason for the continued shift. After all, clients have looked for safer places to place their retirement savings with the recent volatility in the fourth quarter of 2018. Basically, it’s been easy to sell annuities without the complexity of an income rider or loss of control due to the use of SPIAs or DIAs.

We tend to sell what clients want, not what they need. Ultimately, we have to work in conjunction with our clients’ goals but, too often, it feels like we may not be hitting the true need when we complete a transaction that doesn’t involve an income discussion.

Asset protection is an important function in today’s market conditions. Don’t get me wrong … annuities provide value to many portfolios with interest rates increasing, market fluctuations, and tax-deferred growth on nonqualified assets.

However, the biggest lift that annuities provide is the opportunity for lifetime income. Longevity affects so many other risks during retirement. The ability to shift this single risk to an insurer greatly enhances the probability of success in retirement.

Sequence-of-return risk remains a variable that no one can predict. The timing of a correction – in a modest or full bear market – can make as much as a 13-year difference in how long a client’s assets last. Without guaranteed income in place, an ill-timed downturn may affect the lifestyles of Americans who are depending on systematic withdrawals. Strategies that maximize Social Security and guaranteed income options can provide stress relief on the portfolio.

At the end of the day, failure of a portfolio with guaranteed income is not catastrophic. Portfolios without guaranteed income will be force into a different lifestyle.

Winning Strategy

With guaranteed income, failure is not catastrophic. Change your focus and talk to your clients about holistic income planning.

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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.

Retirement Income Income Planning Winning Strategies

Stop Saying, “I Don’t Have Time”


Annuities

I’ve traveled over 40 weeks this year, visiting our advisors and speaking at conferences. As I sit in the Atlanta airport on a layover, I see people playing video games and watching videos. By their reactions of smiling and laughing, what they’re watching isn’t likely educational or business-related.

But, these same people will likely complain to their co-workers about not having enough time to get things done. If you want to boost your productivity, you have to evaluate your time management skills.

No Time Wasted

When I was a student manager, in a typical two to three-hour basketball practice, there were no wasted minutes. Coach Knight mapped out the entire practice, drill after drill. He set the tone for each session by addressing the team in the locker room and telling them what they’d be focused on. He might be paying attention to the angle of the cuts or the position of screens. Each day was unique based on the current state of the team’s development.

Think about mapping your day in a similar fashion. Time blocking can be an effective tool to create an environment of focus. I color code my calendar to make sure I’m paying attention to all the things I need to do in order to run a business. Time is devoted to sales skill development, advisor and key account interaction and internal meetings, among other required activities.

To build a successful business, you must focus your energy. Every part of your business needs your undivided attention … but not all at once.

Additionally, you need time to relax and be with family. Unfortunately, for busy professionals, that time gets lost and ultimately needs to be scheduled – just like a client appointment. Sometimes that feels like a stigma, but the fact you are devoting time for yourself and family is just as important as working in your business. And, I’m as guilty of that as anyone.

Plan Ahead

At the end of the day, you have the same amount of time as everyone else. Some people simply use their time more wisely, effectively and efficiently than others. Here’s what you can do to make the most of each minute:

  1. Plan your business goals for the year
  2. Break those down into monthly goals and activities
  3. Map out the weekly and daily behaviors you must do in order to execute your plan
  4. Once you identify those activities, schedule them

Winning Strategy

Focus your attention on revenue-generating activities. Schedule those things that are most impactful to reach your goals.

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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.

Time Management Retirement Winning Strategies

4 Reasons to Focus on Income Planning


Annuities

Throughout the year, I travel around the country to visit advisors. Regardless of when or where I am, there is always an inclination that our industry will be replaced by technology.

Many firms have established some type of robo-advisor platform to attract the younger generation of investors. But we have to look at the future in terms of our clients’ needs – which goes beyond access to technology.  

I feel confident and bullish in our industry. And I believe we need a reinvestment in people to help overcome the challenges that so many Americans face during retirement. Below are just a few reasons:

 

  1. 10,000 Americans retire every day.1 This number will not decrease significantly until after 2030. There is nearly an endless flow of prospective clients for our industry to help. In fact, I would argue that we are underserving the majority of retirees because we don’t have enough advisors in our industry today.
  2. Social Security continues to be misused. Even with all the education that our industry has provided over the past decade, less than 5 percent of retirees maximize Social Security and defer the income to age 70.2 Case study after case study show the benefits of the primary wage earner delaying income.
  3. We continue to live longer. According to the CDC, Americans are living 2.5 years longer for every decade since 1900.3 But we have saved less money than any time in American history. The combination of these facts means that we will have to provide more income for a longer period of time with fewer assets than any planners before us.
  4. Annuities are one of three vehicles to protect against longevity. Defined benefit plans continue to be removed from employees’ benefits. Social Security provides longevity and inflation protection to some extent. However, annuities are the only vehicle that Americans can put their hard-earned assets into and gain mortality credits that help offset longevity.

 

All of these reasons mean the need for income planning will continue to increase for the next 10-15 years. If you are looking for a new concentration, look at retirement income planning. I am confident that you will help thousands of Americans and find a pool of prospective clients for many years.

 

Winning Strategy

Implement retirement income planning into your practice. There are plenty of prospective clients and an abundance of need.

 

Winning Strategies Podcast

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Catch the latest insights from Mike McGlothlin and his guests on his podcast, Winning Strategies.

Venture over to listen to breakdowns of topics discussed here and webinar deep-dives that you won't hear anywhere else!

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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.

 

Learn More

1Pew Research Center, “Baby Boomers Approach 65 – Glumly,” December 2010: http://www.pewsocialtrends.org/2010/12/20/baby-boomers-approach-65-glumly/

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

3Duke University, “People are living longer and healthier: Now what?” March 2010: https://www.sciencedaily.com/releases/2010/03/100324142121.htm

Retirement Income Planning robo-advisor

Inflation: Your Best Lead Generator of 2019


Annuities

Inflation. It’s been called the cruelest tax of retirement. But as an industry, we’ve failed to talk about income increases for the last 10 years. The inflation rate has been near zero for a long time due, in large part, to quantitative easing.

It’s easy to forget the devastating effects of inflation. However, over time, the same income will be able to purchase fewer things than it does today. Suddenly, your clients will wake up and feel their cash flow is constrained by more expensive items. That is especially true with items such as higher education, health care, and long-term care.

Most Americans will plan for their income needs through qualified account balances, nonqualified savings, a few pension plans that are still available, and Social Security. Of all of those, Social Security is the only source that potentially increases with inflation. For 2019, recipients will receive a 2.8 percent increase from last year. Other forms of income – guaranteed or not – don’t have a built-in feature for inflation protection.

How many retirees are happy with a raise in their income? I guess that no one will return the additional cash they receive in 2019. So, the conversation you need to have with your clients is: “If you like the raise you got from Social Security, let’s talk about doing the same with the rest of your retirement income.”

I bet if you talk with your clients about their recent raise from Social Security, they would likely come to your office to learn how to do it with the rest of their retirement income portfolio. That question alone might be the best lead generator you use at the beginning of 2019.

 

Winning Strategy

Think in terms of after-tax, after-inflation income. Help your clients understand how they can give themselves a raise by addressing inflation in their retirement plans.  

 

Winning Strategies Podcast

Craving More?

Catch the latest insights from Mike McGlothlin and his guests on his podcast, Winning Strategies.

Venture over to listen to breakdowns of topics discussed here and webinar deep-dives that you won't hear anywhere else!

Listen 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.

 

Retirement Inflation Lead Generation

The Regulation You Need to Be Talking About


Annuities

Recent news indicates a new U.S. Department of Labor rule will be set forth in the fall of 2019. But don’t be distracted. There’s another piece of legislation that needs your attention.

Pending tax reform, which will likely be addressed when Congress reconvenes in January, puts several tax benefits in question for retirees and their beneficiaries. And, some are critically important in the transfer of wealth.

 

The Great Tax Transfer

It’s estimated that trillions of dollars of wealth will pass to the next generation over the next two decades. It will come to the surprise of many beneficiaries, however, that most of their money will be taxed.

One of the changes that the Retirement Enhancement and Savings Act addresses is the ability to stretch qualified accounts at death of an IRA owner. It would limit the amount to just $450,000. Everything else would have to be received as a lump sum or within five years of the death of the IRA owner. This places a significant amount of tax due at the time of death.

As I travel around the country, I sense that the increased federal gift and estate tax exemption limits have lulled planners and their clients from looking at the income tax payable at transfer. That’s dangerous – they could be dropping an income tax bomb on their beneficiaries.

 

Defusing the Bomb

Like any obstacle, legislation can become an opportunity for the financial services community. There are several ways that you can position your clients – and their beneficiaries – to win, regardless of what happens in Congress.

  • With the lower tax rates introduced by the Tax Cut and Jobs Act of 2018, it benefits the client to convert qualified accounts to Roth IRAs. This allows the client to have tax-free income for retirement. At death, the proceeds are disbursed tax-free to beneficiaries as well.
  • The embedded gains in nonqualified annuities are treated as taxable distributions, and they are generally taxed on a last in, last out (LIFO) basis. This creates a great opportunity to take advantage of innovative income riders that allow the exclusion ratio to be used for tax purposes. More importantly, it allows the beneficiary to access the cost basis first at the death of the current annuity holder. That puts the beneficiary in control – not the IRS.
  • Finally, it’s always a great time to discuss the importance of life insurance with large IRA holders. It remains the most tax-efficient method to transfer wealth.

 

So, the government is likely to continue regulating the way we interact with our clients. But Congress is likely to have a larger impact due to the tax consequences on our income strategies. Focus on creating income that is efficient for both clients and their beneficiaries.

 

Winning Strategy

Don’t let the DOL distract you. Pay attention to regulation that can impact your clients’ future.

 

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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.

 

Retirement Regulation DOL Tax Transfer