Tuesday, September 3, 2013

Kryptonite for Retirement Anxiety

The financial world we live in today is very different than the one even 5 years ago. Death may be frightening, but to a majority of older Americans, the possibility of outliving their savings is even worse. In a new poll of people ages 44 to 75, more than three in five (61 percent) said they fear depleting their assets more than they fear dying. “One of the things in the study that was surprising to us was the level of fear” among respondents, says Katie Libbe, vice president of consumer marketing for Allianz Life Insurance Co. of North America, which conducted the poll of 3,257 people. “It was greater than we anticipated.” Additionally, 92% of respondents to Allianz Life’s study said they believe there is a retirement crisis in this country. WOW!!

Annuity sales crossed the 200 Billion mark in 2010 and 2011 sales continue to climb in double-digit leaps. This is a good time to be an annuity seller, and with the dramatic market fluctuations of late, it's a good time to be a annuity buyer. 50% of all pre-retirement boomers surveyed stated that they would put most of their assets in an investment that provides guaranteed income for life, even if it pays a low return, according to an Insured Retirement Institute (IRI) report."It's not return on my money I'm interested in, it's return of my money." The words of Mark Twain are more apropos than ever. Reaching out to the baby boomer generation( 79 million) who are marching towards retirement is an opportunity you should explore.

Changing Times

The dynamic has shifted in annuities. The spotlight has officially shifted from "how much can I accumulate" to retirement income strategies. Annuity historians may one day call this the all-about-income era. Hot buttons are "protected growth" and "lifetime income". It has only been 5 years since the debut of guaranteed lifetime withdrawal benefits (GLWB's) in the indexed annuity(IA) market. But since June 2006, we have seen carrier after carrier delve into this market. Why are people flocking to have guaranteed lifetime income, without the "handcuffs" of annuitization? Clearly, agents are selling the "income story", with historically low caps and participation rates. Second, carriers are adding "extra whip cream and cherries" for consumer appeal.

Let's take a quick refresher course. If you would like to know more about the mechanics of IA's, contact me at shawnbyerly@gmail.com

GLWB- A rider, endorsement or additional feature embedded in, or accompanying the IA that guarantees annual withdrawals at a specified level( depending on annuitants age), regardless if the account's value falls to zero.

Guaranteed withdrawal payments- the lifetime income payments that an annuitant receives under the GLWB of their annuity.

Benefit Base- The annuity's value, which the GLWB payments are based upon. This is a separate value from the account value and is only available by taking guaranteed withdrawal payments.

Accumulation Benefit, aka Rollup- A common feature on GLWB's that guarantee the benefit base will grow by a certain percentage( 4 to 14%) as long as the annuity contract is held in deferral and lifetime income payments are not taken. This percentage is not a bonus or a guaranteed annual return on the base contract. Many producers and clients get enamored by these large numbers. It can only be realized if the annuitant holds the policy in deferral and is usually limited to a certain number of years (typically 10).

Rollup Deferral Period- max number of years the rollup benefit will be credited. (10 or 20 years) Most contracts offer a "restart" after period has ended.

Remember, GLWB's of IA's are not comparable to GLWB's on Variable annuities. IA's are fixed products, and provide principal protection. Every rider on the market does have a cost. Usually around 75 bps. An important question to ask is, " Can this charge evade the principal of the contract? Surprisingly, some can. It's very important to know which contracts are the best. That's where we come in. Finally, don't get enamored with huge rollup numbers like 14%. This number doesn't mean much if the withdrawal rate is really low. The two numbers must work together.

How to Sell Annuities: Just Ask

The easiest way to start selling annuities, is to ASK your clients if they have any money in CD's or even a checking account. I've attached some great information on how to position an annuity verse a CD. Then ask this question verbatim. "If I could show you a way of getting a better return on your money while never risking your principal, deferring taxes and guaranteeing you an income for as long as you live, would you be interested in talking more?

One of our agents asked this exact question and found 400,000 dollars sitting in a checking account! His client didn't know what to do with the money and was uncertain what to invest in.That's the definition of fear.

The bottom line is this, you'll never know if you don't ask. If liquidity is a concern, we have one contract that comes with a ROP feature. The client can get their initial deposit back without paying a surrender charge. GUARANTEED! Reply to this email to the get the product guide.

There is no doubt that this is the time to educate boomers about the benefits of insured retirement strategies. Many of these strategies can help boomers grow their retirement nest egg without worry of stock market fluctuations as well as provide a guaranteed income for life.

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