by: Mark D. Milbrod, CLU
Vice President, Agent Support Group
By far, one of the largest fears of retirees is the notion of outliving their retirement assets. As the holidays are upon us, the focus is on spreading cheer, gift giving and being with family and friends. But we also can’t help being distracted by the daily market volatility that we are seeing on a daily basis. This definitely causes anxiety and feeds into those fears.
Knowing full well that outliving one’s retirement assets is of paramount concern, we as advisors have a tremendous opportunity to help our clients put plans in motion to help insulate and protect them against many of the financial threats that can destroy their plans for a sustainable financial future.
When planning for retirement, most people think that it is all about protecting their assets when the truth of the matter is that it is all about protecting INCOME. They often will not spend money and hoard their assets, tucking them away until they may need it. Through techniques at your disposal, there are many ways that you can protect your client’s income and truly guarantee that it will be there for as long as they live.
Some of the most common techniques used to guarantee income are through the use of individual annuity products. Most people will tell you that they don’t like annuities or simply don’t trust the insurance companies. The truth is that they don’t fully understand them. Here is the ultimate irony, Social Security and Pensions are nothing but “annuity” payments and I don’t see anyone turning away those checks when they arrive. So isn’t it reasonable to add another guaranteed annuity payment through the use of a “repurposed asset.” By purchasing an annuity, you are essentially adding an additional bucket of guaranteed income, because after all, it’s about protecting income and not assets.
The annuities can come in many different forms. The three most popular are Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs) and Deferred Annuities with Guaranteed Roll-Ups/Income Riders. With either one, or a combination of different types, you can provide your clients with very large streams of guaranteed income. If your clients truly understand what these products can do, they will most likely welcome them as part of their retirement portfolios and allay some of the fears of outliving their money.
Even if Guaranteed Income Annuities are incorporated into a “well balanced” income portfolio, the INCOME is still not 100% safe from all threats. So be sure to include some degree of Long Term Care protection into any retirement plan. In my opinion, no retirement program is complete without it. After all, you are not trying to guarantee that the nursing home gets their money, you want to protect your client’s income that was supposed to go to them first. The LTC element protects the income intended for them from going elsewhere and makes sure that there is extra income available for the LTC threat.
One last note, since annuities will usually spin off larger amounts of income than other types of assets, some of the money can be used to purchase life insurance that will be there for the heirs. Remember, the ultimate goal is to NOT outlive your retirement assets. Turning as much of it into guaranteed income is the key.
The holiday season is all about giving.
Just make sure that in addition to giving to others it also “tis the season to plan your future.”