Driverless Cars and Life Insurance
By: Mark D. Milbrod, CLU
Principal, Agent Support Group-June Blog

 

driveless carsToday, so much of what we do has been taken over by technology.  So many industries have been forever changed and as a result, many jobs have been altered as well.  If we compare jobs and tasks today to what they were when we were just starting out, the results are “mind numbing.”

Let’s think about it.  Books and magazines have been largely replaced by their electronic counterparts.  Taxis by Uber & Lyft.  TV services by the likes of Netflix and Hulu.  Music by iTunes.  Even how we pay for things has changed with Apple Pay, PayPal, etc.  This list goes on and on and everything has changed due to technology.  Some things are just better left unchanged.  For example, I don’t like e-books.  I haven’t drunk that Kool-Aid yet.  To me, there’s nothing like the feel of a book in your hands and the ability to turn a page.

Don’t get me wrong. I’m a big fan of technology and believe that our lives are better for it but when it comes down to it, there is no substitute for the human element with some things.   This is especially true when it comes to Life Insurance.   I don’t like the growing trend of people shopping for their life insurance on line.  The majority of people are grossly underinsured and don’t understand the real needs associated with life insurance.  Nothing can replace the years of experience that comes along with a seasoned life insurance professional.

Life Insurance is not an optional thing that you should maybe get around to one day, it’s a necessity.  Just look at all the Go Fund Me pages we see in the wake of some tragedy.  If insured at all, the average young family doesn’t have adequate life insurance.   The funds that a surviving spouse needs to make a meaningful impact on their financial lives are often misunderstood.  This is not a knock to the average person they just don’t know how much life insurance is enough.

Here are some facts:

  • Only 51% of Americans own some type of Life Insurance (and I’m surprised it’s that high)
  • A large majority have group life insurance that they feel is portable upon leaving their job
  • A large majority of policies have improper ownership or beneficiary arrangements
  • Most policies provide grossly low/inadequate face amounts
  • “Non-Working” spouses are typically overlooked and not insured
  • Most people don’t know the many uses of life insurance including the ability to grow cash value and ultimately remove supplemental tax-free retirement income
  • Most people don’t know about the myriad of living benefits such as Long Term Care or Chronic Illness provisions
  • Most people don’t know the nuances of income replacement and how much of a role life insurance plays in that process

The list can go on and on.  The point is that when it comes to certain things, there is no substitute for the human touch and plain old fashioned experience. For all of my years in the business, I can speak of countless client encounters where the above holds so true.  The world of technology has put so much information at the fingertips of our current/prospective clients, even when it comes to life insurance. The trick is being the one who can bring light onto the stage and make them understand the complete value of life insurance.

Today, the ultimate buzz in the area of technology is the talk of driverless cars in the very near future.  I wouldn’t invest my money there just yet.  After all, I don’t even trust plain old cruise control.  If you’re a Taxi Driver however, this notion will not make you feel secure about your future.  As a Life Insurance Professional, do you want to watch that “Driverless Car” pass you by on the side of the road or do you want to show them the right way a car should be driven?

 

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

Alzheimer picBy: Mark D. Milbrod, CLU
Principal, Agent Support Group

 

Over the last few weeks, I was introduced to some staggering statistics as they relate to Alzheimer’s and other types of Dementia.  These figures will greatly impact the way we conduct ourselves as insurance/financial advisors.  Here is what I learned:

  • In 2016, there were 15.9 Million Informal Caregivers in the U.S. providing care for Alzheimer’s and other types of Dementia. That means that family and friends provided this kind of care.
  • This care amounted to 18.2 Billion hours of collective care.
  • That amounts to 1,145 hours/caregiver or simplified even further, 22 hours/week.
  • This “unpaid” care monetized, is equal to over $230 Billion.

Considering formal care in the same year for Home Health Care and Facility Care combined was over $241 Billion, it’s a fair assumption to say that the above numbers are worthy of our undivided attention.  To further the problem, there are more than 5,000,000 Americans living with Alzheimer’s and by the year 2050, it could be as high as 16 Million.

Since the majority of care provided is by family members and friends, it is no wonder that a huge financial toll is realized by these caregivers.  As mentioned above, the average time spent caring for these individuals is 22 hours/week.  It is presumed that there can be a large amount of wages lost for the time taken to provide care.   Also, two thirds of caregivers are women, of which 34% are age 65 or older.   What is more troubling is that over 35% of these caregivers have diminished health due to the physical and emotional strain that they endure.

As it relates to the caregivers, it is also noteworthy to mention that 1/4 of them are considered “the sandwich generation,” which means that not only are they caring for an aging parent, but they also have children under the age of 18.

When you look at all of the numbers and process it all, it is very scary.    Although there is nothing we can do to take away the anguish of watching as a loved one slips away, we can help ourselves and our clients with proper planning tools and techniques.  These approaches can help mitigate some of the financial effects and maybe help alleviate some of the emotional toll that comes with the territory.

Today, we have so many tools at our fingertips.  There are many different policy designs offering a number of Chronic Illness & Long Term Care definitions, each covering cognitive impairments as an instant benefit trigger.  There are Stand-Alone LTC policies, Life Insurance with CIR/LTC Riders and Blended Life options.  Through these different product designs, we can offer so many ways to access benefits and in some cases, they can even be uncapped.

Like I stated when I started this post, the statistics are staggering.  This is an alarming crisis facing all of us and we at ASG, are dedicated to assisting you in offering expertise and advice to that growing group of caregivers and their families that are in need of our the products and services that we all provide.  The Informality with Informal care needs to change.  The more people we tell this story to, the better off we will all be.

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

by: Mark D. Milbrod, CLU
Principal – Agent Support Group

Bad News Bears

One of my favorite things about this time of year is the start of baseball season.  As a kid, playing baseball was one of my biggest thrills.  I was not a bad player but I wasn’t the home run hitter that all kids aspire to be.  That being the case, I realized that not everyone can be the home run hitter so I concentrated efforts on making sure I would contribute to the team and get on base and help my team win ball games. 

Having that desire to contribute and win, I quickly realized that a great way to do that was to hit singles and doubles, which I was certainly capable of.  Scoring runs would win games and it was a simple recipe for success.  Getting on base with singles and doubles was the way to scoring those runs and making things happen. 

Today, it’s no different.  But instead of competing on the baseball diamond for those runs, I find that when working with agents and advisors, that diamond is replaced by sales quotas via applications and paid business.  With the number of advisors that I work with, I realize that a lot of them are always trying to hit the game winning home run every day.  The problem is that they may not have the ability to do that just yet.  They are simply not that “home run hitter.”   Sure, eventually they will hit it but for now they have to be concerned with getting on base with singles and doubles. 

With the markets that we serve, we know that there are many opportunities to sell small to medium size cases quite frequently.  The trick to making consistent revenue in our business is to have a steady flow of those cases that are always in our pipeline.  One of best examples to accomplish this is to incorporate Long Term Care Riders in our everyday routine.  These types of cases appeal to a wide array of clients ranging in the 45 – 65 age categories.  The LTC discussion is a great way to access this market and once you get in the door, there are so many other ancillary pieces of business to write.  They can be term sales, buy-sell type sales or retirement supplements.   All of these types of sales are the “singles” and “doubles” that are needed to knock in those runs. 

Don’t get me wrong, I’m not saying to not shoot for the bleachers and knock one out of the park every now and again.  Home runs come after a number of at bats.  The singles and doubles keep you at the plate longer and help you score more runs.  Many a game is won by manufacturing runs and most times, no home runs ever leave the park.  Don’t forget that the singles and doubles (the cases with average premiums in the $4,000 – $6,000 range) add up and win those ball games as well.   

 

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

TAX RETURNS-YOUR VERY BEST PROSPECTING TOOL
By Mark Milbrod, CLU
Partner, Agent Support Group-April 2017

uncle-sam-gift-1940x1940

It is April, spring is around the corner, baseball season is kicking off and of course, as American as apple pie, our favorite Uncle has his hand out for his piece of that pie.  Tax season is upon us and with it comes our best prospecting tool, THE TAX RETURN.   

As we are waist deep in tax season, what better time to remind ourselves of the countless sales opportunities that arise out of this time of year.   The best part is that with the focus on taxes, all of our clients are aware of the things that affect their financial lives. Whether its retirement plans contributions, annual gifts, charitable contributions, etc., it is all fresh in their minds. From just those few items, I’m sure a few sales opportunities come to mind.

As stated above, a tax return is probably our best sales prospecting tool.   As financial professionals, where else can you get a roadmap that leads you directly to all facets of someone’s finances?   

Here are some examples of line items on a standard 1040 Tax Form that can lead you to where potential sales opportunities exist: 

1.     Dependents – knowing how many dependents raises the question to whether there is enough life insurance in force to protect those family members who are reliant on someone. For younger dependents, the college planning conversation usually starts. 

2.     Taxable Interest – See where this income is coming from.  There can be a more tax efficient way to invest funds. 

3.     Business Income – knowing where business income comes from can start the conversation for business succession planning, key employee coverage’s, etc. 

4.     Qualified Plan Contributions – this opens up the retirement planning conversation.  Are they maxed out in qualified contributions? What about retirement goals? Perhaps some supplemental non-qualified vehicles could be appropriate. 

5.     Partnership/S-Corp Income – knowing if there are partnerships, perhaps buy-sell planning can be in order. 

6.     Social Security Benefits – are they receiving SS benefits?  Do they need it?  Perhaps a more efficient use of those funds can be the answer. 

7.     Capital Gains – where are their assets? Is there a better use of those assets? 

8.     Medical Expenses – knowing what their medical expenses are can open up the Long Term care conversation.  Do they have any or what assets would they tap into if they had an LTC event? 

9.     Interest Paid – mortgage interest paid can tell you more about their home.  For clients older than age 62, a Reverse Mortgage can be an option. 

10. Gifts to Charity– if someone is charitably inclined, you can discuss the leverage of life insurance for legacy gifts.   

As you can see, there are a number of sales opportunities that exist by utilizing the 1040 Tax Form as a roadmap.  The examples above are just the tip of the iceberg.  By using this approach, you can start conversations with your prospective and current clients.  In addition, centers of influence, such as CPA’s and Tax Attorneys are excellent sources to have this conversation with.  

With tax season upon us, there are excellent opportunities that will drive new business.  I have been using this approach for many years to huge success.  At ASG, we have tools designed to help you with this approach to marketing.  Contact us today so we can guide you through the process and navigate you through this road map provided by our favorite uncle.

by: Mark D. Milbrod, CLU
Principal – Agent Support Group

March Madness 17

March is here, and with it, the annual College Basketball phenomenon, March Madness begins. Every year the sports world goes crazy as this gets under way. But we in the Insurance and Financial Services Industry have our own March Madness (and every other month for that matter).

If you follow college hoops or you simply get caught up in the hype, it can get pretty exciting. We are all familiar with the visual of “the brackets” that start at the beginning of the tournament. 64 teams start off and we follow the brackets as they wind down to the infamous Final Four.

When it all starts, I find the brackets to be overwhelming and a sensory overload. There is so much happening on one sheet of paper and in the actual tournament, similar to our industry. So here’s a look at Our March Madness and how it looks in my head…

MrachMadnessBracket 2017

Wow! That’s a bit much, but it is the MADNESS that we face every day, every month and throughout the year. This has been especially relevant over the last several months for all of us. We have experienced unprecedented product, legislative and psychological changes that will permanently alter the way we conduct our practices.

What carrier do we choose? Why one over another? From our perspective, each of the carriers have their own niches, whether it is product related, an underwriting strength or a particular feature or benefit that sets them apart.

What product design do you choose? There are so many to choose from; Guaranteed Universal Life (GUL), Indexed Universal Life (IUL), Whole Life, Term , Blended Life Contracts, Life with Long Term Care Riders or Return of Premium Term (ROP), to name a few. Each has its own bells and whistles which make them so unique and adaptable to a number of planning and individual client needs.

From a legislative standpoint, we are seeing potential modifications with the Estate Tax and our healthcare system.  The industry itself is going through changes of it’s own with cost of insurance increases, carrier contractions, massive shifts in product design and a large “name brand” company leaving the marketplace. 

That all leads us to knowing where the Sales Opportunities are. In the center of our brackets, there are four areas (Our Final Four), where all of these opportunities converge, Policy Valuation Modeling, Legacy Planning, Business Valuation Modeling and Asset Repositioning.

It is easy to be overwhelmed by the “brackets” we call “Our March Madness.” We scratch our heads as we try to sort it all out. It is truly overwhelming and it fosters that sensory overload I mentioned earlier. Where are the Sales Opportunities? They are all there, staring us right in the face.

Having a partner that can guide you through all of this is key.  At ASG, we have the expertise to walk you through it and help you Make Sense Out Of All The Madness. 

 

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

marks-barks-blog-logo

lemonadeby: Mark D. Milbrod, CLU
Principal, Agent Support Group- February 2017

When you were a kid, you probably had a lemonade stand at some point.  It was for most, our first experience in running a business.  We created a stand, a sign, a price, etc.  If it was really hot outside, we learned about supply and demand.  We could probably get more money since people needed to cool down with that refreshing cup of lemonade.  At the end of the day, we counted up all of our money and it looked great.  Let’s say you had $20.  Now you had $20 to spend, but it wasn’t that easy.  The realization came when you had to factor in the cost of your time, the materials to make your stand, the lemons, the cups, the sugar and so on.  In the end, you really didn’t “make” $20. If you were lucky, you were left with a couple of bucks.

This gets me thinking about our clients.  Using the lemonade stand as a metaphor for planning, have you asked them lately how their lemonade stand is going?  Do they realize the cost of running their stand and in the end, what is left over?  As we all know, it is difficult to get people to talk about tough topics such as Life Insurance, Long Term Care, Disability Income and more importantly, having enough money to retire.

If we talk about Life Insurance, there is a discussion that has to take place asking how much of a lump sum is needed and how much future income needs to be replaced.  After their personal funds, what is left over?  With almost all, there is not much in reserve to sustain a family for any length of time.   The life insurance proceeds become what is “left over” from that $20.   Similarly, when dealing with estate planning, the life insurance becomes the bulk of money left to heirs.  People forget that Life Insurance is a contract to buy money.  So why not buy it for pennies on the dollar.

The same argument can be made for Disability Income Insurance and Long Term Care protection.  Today, we can provide LTC benefits in more efficient ways via Linked-Benefit Plans and Long Term Care Riders.  Without any of these in place, there is usually not much “left over,” if anything at all.    One of the major objections we get when bringing up LTC coverage is that it is too expensive.  Your response should be… If you think LTC Insurance is expensive, see what it costs without it.

Last but not least, Annuities, namely Guaranteed Income Annuities.   These are the most underused financial instruments available today.  With advances in medical science, people are living longer and are truly afraid of outliving their retirement assets.   Ask your clients how long they want to guarantee their retirement income?  My guess is that they want it forever.  People make the mistake of liquidating assets for income when needed and as such, are subject to market timing risk.  With Guaranteed Income Annuities, a paycheck will be there regardless of how long you live.  After all, liquidity is not a one time event, it’s a lifetime event.  There is no other product that can take away market risk and guarantee income for as long as you live.

So, let’s go back to our lemonade stand for a moment.  You made your $20 and you thought it was all yours.  When it was all said and done, you walked away with a couple of bucks.  That was not nearly enough compared to all of the work you put in.  Your life’s lemonade stand is no different.   Life Insurance, Disability Income, Long Term Care or Annuities are all ways to protect our families so that we have enough “left over.”

 

 

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

happy-new-year-baby-2gifby: Mark D. Milbrod, CLU
Partner, Agent Support Group

 

Here we go…It’s 2017 and I am sure it is going to keep us all on our toes.    The Insurance Industry is going to have a lot of changes ahead.  Among these changes, and with Donald Trump as our new president, there is talk of eliminating the federal estate tax.    This has caused a great deal of chatter among insurance professionals who are seeing this as the end of “Estate Planning” types of sales.

Although it is true that this market will likely contract, a need still exists for planning in the wealthy, affluent communities, but the middle market we serve is still full of opportunities.

For our wealthy clients, life insurance still provides unique features that open the door for a number of sales opportunities that cannot be rivaled by any other financial instruments.   Our wealthy clients have very specific problems that can be solved with the products that we provide.  Let’s take a look at a few…

Estate Equalization : For clients that have family businesses with only certain family members working in that business, there is a need for life insurance to provide equal distributions for the “non- involved” family members/heirs.

Business Planning: Life insurance still provides the ideal vehicles for a number of business planning solutions such as Key-Person Indemnification, Buy-Sell Planning, Securing Loans, Deferred Compensation for key personnel and golden handcuffs to retain that same personnel.

Asset Class Inclusion: Life insurance can be used as a diversification tool that leverages dollars into large guaranteed tax-free sums of money for generational planning, regardless of market volatility.  Even if there is no estate tax, these windfalls will be a welcomed addition to any estate plan involving wealth transfer.

Charitable Planning:  Most affluent clients are philanthropic.  Assets can be given to charities during their lifetimes and be replaced to their heirs via life insurance proceeds on a tax free basis.  By structuring a charitable gift program while simultaneously purchasing life insurance, they can accomplish the best of both worlds.

Asset Protection:  Life insurance that is put into trusts provides asset protection via privacy statutes.  These privacy statutes vary from state to state and are very popular amongst affluent clients as a means of shielding assets from outside threats and/or frivolous lawsuits.

The wealthy/affluent community has and will continue to use life insurance for the many benefits outlined above.   For the middle markets, let’s not forget the role that life insurance plays.  Simple things like income replacement, mortgage protection and supplemental retirement planning will always serve this marketplace very well.  Also, with the additional of Long Term Care Riders on Life Insurnace contracts, we can offer protection against health threats that can be financially catastrophic to most families.

Contrasting the needs of the middle market segment to the affluent, it is apparent that regardless of estate tax laws, there will always be needs to fill within this group.   In the wake of tragedies, the middle market clients are more concerned with Wealth Creation techniques that will assure their families secure financial futures.

So, with 2017 upon us, it is clear that we are still vital to the markets we serve.  Whether it’s the affluent or the huge middle market segment, we are positioned well to provide products and services that are needed by both.

All the best for a Happy, Healthy and Prosperous 2017!

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

It’s All About Attitude

 

 

The year is coming to a close and I for one am glad.  This has certainly been one bizarre year and I am ready to move forward.  The last few months especially, have been filled with so much negativity and my fear is that it will continue as the weeks and months go by.

Regardless of which side of the aisle that you stand on, we, as sales people have to move forward and continue to provide for our families and make a living.  After all, Democrats and Republicans alike are in need of the products and services that we provide.

I am a person who always stays positive and believes that attitude is everything.  To prove it, I ask that you follow along and complete the math problem below…

Number/Letter Key

number-letter-keyAbove is a Number/Letter Key.  Every letter of the alphabet is assigned to a corresponding number below it. For example, the Letter M represents the Numerical Equivalent of 13.  Using this key, for the words KNOWLEDGE  & HARDWORK below, fill in the corresponding numbers and add them for a total percentage for each…

knowledgehardwork

 

 

 

If you added correctly, KNOWELDGE equals 96%, while HARDWORK equals 98%.  We all have a great deal of experience and know a lot about the products that we sell and the many techniques we can use to help our clients.  We also all work very hard to achieve the successes that we strive for.  The problem we have is keeping our eyes on the real target and to not be distracted by the negativity around us.  In the end, it’s all about ATTITUDE. Using the same key, fill in the numbers for ATTITUDE…

attitude

 

 

 

Although KNOWLEDGE and HARDWORK are important, on their own, they fall just short of 100%.  ATTITUDE however equals 100%.   I don’t find this to be a coincidence.    Attitude really is everything!

With all of the negativity surrounding us, it is important for us to focus on the right things.  It is easy for us to be distracted by everything that goes on around us but it’s more imperative that we know that the message we bring to our clients, through the products and services that we provide, are more important than ever.

The math is simple, but it works.  Think about the importance of ATTITUDE and how it will positively impact your life.  You owe it to your clients and most of all, you owe it to yourself.

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

Building The LTC Bridge

bridgingthegap

By: Mark D. Milbrod, CLU-Nov. 2016
Principal, Agent Support Group

By now we have all heard the argument for Long Term Care Insurance.  We know how important it is and why our clients should have it.  The irony is that 95% of the people that should have it don’t, and if a Long Term Care event happens, 95% or all of what someone has built over their lifetime can be gone before you know it.

So, why aren’t we selling more of it?  The truth is that it is a very emotional sale and most people will back off for many reasons, but primarily because it is too expensive and people would much rather spend that money on other things.   There are a host of other objections/excuses that are thrown out to us, such as:

  • “I’m in good health. I’m going to live a long time and won’t need it”
  • “No one in my family as ever needed it”
  • “I’ll drop dead suddenly and not need any on-going care”
  • “I can give away our assets and have the government pay”
  • “I can invest the money and make out better “
  • “My medical insurance will pay”
  • “My kids will take care of me”
  • “I’ll deal with it when the time comes”
  • “I’ll put some extra money away”

Do any of these sound familiar?  I’m sure they do.  What many people don’t realize is that when something does happen, and statistically 6 out of 10 people will require some degree of long term care in their lifetime, it is often financially devastating to the family.  Aside from the emotional toll, savings, retirement plans and homes can be lost.

There are a number of ways to help protect against the financial threat of Long Term Care.  Obviously Traditional LTC Policies are available or the Blended Life Alternatives, such as MoneyGuard and Nationwide Care Matters ( in most states but not NY).  The rates are guaranteed to never change, premiums are paid on a limited basis( single pay or up to a ten pay) and death benefits are possible in most states even if the benefits are exhausted for LTC.   But the product that has been growing in popularity is The Life Insurance Policies with Long Term Care Riders (LTCR’s).  These are available on a GUL or IUL chassis.  What makes these so popular is the fact that unlike a traditional LTC policy, the premiums are guaranteed to never change and if you never go on claim, there is a death benefit ultimately paid to a beneficiary.

These are great policies to sell to clients in their late 30’s and 40’s.  The rates are so inexpensive now that it pays to take care of this planning scenario today.  But the bigger picture is that these clients have parents who are in their 50’s, 60’s and even 70’s.  Does that generation have adequate assets to protect them (or their families) from the threat of a Long Term Care event?

Simply stated, we are living longer today.  With advances in modern medicine, conditions that had previously caused  “sudden deaths” are now resulting in prolonged life that impairs health to the extent that there is a potential need for long term care.  The “older age” segment of our population, which is considered to be 85 and older, is the fastest growing age group in the country.   In fact, over 50% of that age group is receiving some form of long term care.  By 2035, it is predicted that the over 65 population will double to approximately 77 million.  Furthermore, when it comes to provided care, over 75% of the daily care hours are provided in home by family members.

So, when we look back at some of those excuses people have for not buying some type of long term care protection, who will be affected most by those inactions?  The answer is, those clients today that have parents in their 50’s, 60’s and 70’s.  Would it not make perfect sense to bring the topic up to them since statistically something is going to happen to their parents in the foreseeable future?   By planning now, you can help Generation 2:

  • protect against potential loss of future inheritances
  • protect against fire sales
  • protect against lost wages while caring for a parent
  • assure the dignity of loved ones
  • and most of all, mitigate or eliminate the financial burdens associated with the emotional strain of caring for a loved one during a prolonged illness.

Most advisors think they are not in the LTC Market with clients that are in their 30’s and 40’s, but they really are.  It’s all in how you perceive it.  Not only can you help them plan now for their own future while the costs are low but you can Build a Bridge to assist them with an event that can potentially impact them more profoundly, their parent’s long term care event.

 

Find more of Mark’s Bark’s Blogs on our website: http://www.asglife.com/insurance-view/marks-barks-blog/

marks-barks-blog-logo i_forgot

By: Mark D. Milbrod, CLU
Partner, Agent Support Group-October Blog

 

One of the most underused planning tools is The Single Premium Immediate Annuity (or SPIA).    They are extremely versatile and be used effectively in so many sales scenarios.  We find ourselves explaining the benefits to so many advisors who have not yet used the SPIA to its maximum potential.

They are particularly helpful in our current economic cycle.   The payouts are based on life expectancy so the older you are, the higher the income is.  The income is guaranteed so the market risk factor is taken out of the equation.  There are a number of scenarios where you can use them effectively…

Market Downturns

In the case where you have clients that have lost money in the market and have not fully recovered, SPIAs are a great way of making up the difference without risk.    The downturns probably impacted their ultimate desired amount of retirement income and a SPIA can be utilized to fill in those gaps and possibly put them back to where they planned on being.

Tax Planning

One of the major benefits of SPIAs  is the taxation element.  When you start receiving income, you are taxed on only the amounts coming out on an annual basis.  In addition, with non-qualified assets, a large majority of the income is considered a return of basis and therefore not taxable.  Only a small portion of the income is considered taxable.  Also, once you annuitize, the corpus is out of your taxable estate.  This can be particularly helpful for estate tax inclusion.

SPIA/Life Combo

If clients have non-qualified funds that are not needed, you can take income (annuitize), pay the tax and with the net income, make gifts and  purchase trust owned life insurance outside of the taxable estate.  This technique is extremely helpful with respect to transferring assets to the next generation.

RMD Scenarios

For clients that are taking Required Minimum Distributions (RMDs) from IRA assets when they turn 70½, SPIAs can be a helpful tool.  The qualified funds can be annuitized and the income generated will be fully taxable on an annual basis but the corpus of money will be out of the taxable estate.  In this scenario, the net proceeds (out of the IRA), can be used to purchase life insurance.  The net result is a significant amount of income tax savings and the heirs can ultimately receive a greater amount of assets tax free.

Competing with Guaranteed Income Benefit Riders

There is a lot of talk about the Guaranteed Income Benefit Riders on Variable Annuities.   Often times if you compare the Guaranteed Income payouts to that of a SPIA, the SPIA incomes are guaranteed on a higher level.  It is worth comparing if you have any situations like this.

Longevity Planning

One of the major concerns of people today is outliving their retirement assets.    A huge benefit of a SPIA is that you cannot outlive the income stream.  Whether you live 5 years or 50 years, the income will continue for your lifetime. This can easily be set up for a husband and wife so that the income will continue until the second spouse passes.

Multi-Generational Gifts

SPIAs can also be used to pay income on the life of multiple annuitants.  Perhaps a grandparent wants to provide income to a grandchild.  Funds can be deposited into an annuity with both listed as annuitants.  Even after the grandparent passes, income can continue for the life of the grandchild.   This can be a great way of being remembered for years to come.

As you can see, the SPIA can be used in a number of ways.  The income can be based on one life or multiple lives.  They key is to know the versatility that this product offers and how you can help your clients with a number of planning scenarios.  The tax favored treatment of most distributions is what really makes the SPIA so attractive.

So, don’t forget about this Forgotten Planning Tool.  It will definitely open many opportunities.

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