Building your practice through better positioning, Pt. 1: Telling the longevity story

By Shawn Moran


It has often been said that hindsight is 20/20. The problem is that when we look forward, our vision can get a little blurry, particularly when it comes to retirement planning.

Although I personally believe that it is a great time to be in the retirement planning business and to be offering annuities to our clients as a part of their retirement solution, more often than not, I am asked the following by producers: “How can I position annuities to clients so that they understand their value, and counter the bad information they may have already heard?” I believe that financial professionals are able to do that best when we are “telling a story.” Let me explain.

I have a two-year-old child. Nothing gets him to run to me more quickly than when I ask him if he wants me to tell him a story. Although we get older and a little wiser, our desire to hear a story never changes. Selling annuities with spreadsheets and pie graphs instead of with simple word pictures and stories runs contrary to that longing. It is a bit like if you went to buy a car and the salesman insisted on reading the entire owner’s manual to you instead of just letting you get in the car, smell the leather and start the engine.

In this posting and the next, I want to share with you some word pictures and stories that I use to help position the value of annuities for my clients. I’ll begin here by sharing my “longevity” story, which is about the challenge of our retirement dollars living as long as we do. It goes as follows.

It has often been said that hindsight is 20/20. The problem is that when we look forward, our vision can get a little blurry, particularly when it comes to retirement planning. Let’s find out how blurry by illustrating the challenge of having our money live as long as we do in the volatility of the financial markets.


We’ll use two different retirees named Jack and Jill. They have a lot in common. Let's assume that both of them:
  • retire at age 65
  • have $750,000 at retirement
  • withdraw 5 percent per year of their account for income and index that income to inflation each year
  • have investment returns that exactly mirror the S&P 500
  • live 30 years until age 95
The difference? One retired in 1973 and the other in 1974. Remarkably, that one small difference changes the outcomes entirely.
Jack, who retired in 1973, ran out of money in 22 years. He spent the last eight years of his life broke. Jill retired in 1974 and enjoyed income for the full 30 years of her retirement. She actually saw her nest egg grow to more than $1.2 million at the time of her death.

Why the disparity? Jack did not know it when he retired, but 1973 was a lousy year to collect his gold watch. The market was down dramatically that year, and his retirement account found itself in a hole out of which Jack was never able to dig his way. By retiring one year later and dodging the bullet of 1973, Jill ended up with a great retirement.

The problem is obvious. None of us has the benefit of retiring with a rear-view mirror. We have to look through the windshield at an uncertain future. We do not know in advance if it is a lucky time to retire or an unlucky time. But by securing income from a reliable source such as an annuity, we have the ability to create predictability for our retirement income and greater peace of mind as we enter into retirement.

This first story uses narrative to demystify one of the key risks facing those entering retirement. You may find it useful to compare your approach to what I’ve laid out here, and consider how storytelling might be of benefit to you in your client presentations. In my next posting, I’ll share a story I use to explain how fixed annuities are the middle ground between two extremes.