The demographic shift is clear. Retirement planning has become longevity planning and millions of worried baby boomers are looking to producers for solutions. For producers, finding the best strategy can be approached as a “solve for the need” exercise.
In 1967, when the Beatles released the song “When I’m 64,” life spans were shorter. People in their mid-60s may have thought they were edging into old age. Now, people who live to 65 have, on average, 18.5 years of life ahead of them, according to the National Vital Statistics Report. Many of those people will live into their mid-80s and 90s.
The demographic shift is clear. Retirement planning has become longevity planning
and millions of worried baby boomers are looking to producers for solutions. Boomers have reason for concern. More than 50 percent of Americans will be unable to maintain their standard of living in retirement
according to the Risk Retirement Index
Spooked by the very real prospect of outliving their assets, boomer clients are seeking a dependable lifetime income
. The good news is that producers have an expanded array of products they can use to help clients develop a comprehensive plan; one that includes income, growth and long term care elements.
For producers, finding the best strategy can be approached as a “solve for the need” exercise. By tabulating necessary and discretionary spending, then comparing it to income sources from pensions, 401(k)s, Social Security and other assets, producers can help identify where the client falls short. An annuity product can often fill that gap.
In particular, annuities that offer an optional guaranteed lifetime withdrawal benefit
rider have become very popular. An indexed annuity, for example, offers growth potential, and there’s an upside for both the annuity and the rider if the market does well.
The modest fee for the lifetime insurance provided by a GLWB is easily offset by some big selling points:
- Withdrawal percentages that increase with age and lock in when the client exercises the GLWB
- The benefit base used to compute guaranteed withdrawals may increase through bonuses, step-ups and roll-ups and often reward those who postpone taking guaranteed withdrawals
- Even if guaranteed withdrawals deplete account value to zero, the client is guaranteed the benefit amount specified by the GLWB rider until his or her death
Given the high cost of long term care
, producers may also want to address that need. One option is to layer
a long term care rider on an annuity. This adds additional security, provides a range of care options if they’re needed, frequently offers reduced taxation for payments and may give clients access to a higher percentage of the account value or allow an accelerated payout, depending on the product’s design and timing.
As the 77 million baby boomers retire, they are entering a post-employment period that may span 20 to 30 years or more. Having enough money to maintain their lifestyles is a top concern
. While the enduring love of “When I’m 64” is still important, it’s been joined by an entirely practical chorus of, “Money (That’s What I Want).” Fortunately, annuities, GLWB riders and LTCI options can make it possible to have both.
1 Cubitt Jacobs & Prosek Communications
The above article is intended as producer information, not for use as sales literature (BPD37734).