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Some readers say they want to know how to get started in income planning. Others say theyre doing it but would like to increase their skills. Some find the whole subject mystifying.

Most with whom I speak say the approaching retirement of baby boomers–soon to be the largest generation of retirees ever–is the tipping point. They want to be ready for the day when boomers want to take income from their bulging 401(k)s and other accounts and plans.

But where to start? What to do? Those are their questions now.

Well tackle them here, first by looking at what products (and product knowledge) belong in the income planners toolbox. Then, well see whats being done to help planners get up to speed.

On the product question, you might think the answer is a slam-dunk: Just use income annuities or annuitization to generate a monthly income flow to add to the clients Social Security and/or traditional pension checks. Then suggest augmenting this with interest from CDs or other accounts, sale of assets and a part-time job.

You would be right, of course, about using the annuities. These can play a critical role in enhancing the core sources of monthly income. But as for the rest, the income planner has a cartload of sources to consider, not just a few. For example:

Withdrawals from cash value life policies.
Systematic withdrawals from mutual funds and annuities.
Penalty-free withdrawals from deferred annuities under nursing home waivers (and, in a few products, for unemployment).
Accelerated benefit payments from life policies (most commonly for terminal illness but also, in some products, for nursing home care, etc.).
Bailout provisions in annuities.
Systematic sale of assets from separately managed accounts (and other securities accounts).
Systematic cashing out of T-bills, other bonds and CDs the individual may have.
Payouts from long term care policies.
Lump-sum payouts from critical illness policies.
Payouts from disability policies (if the client has been forced into early retirement due to disability).
Lump sums received if the client elects to trigger “return of premium” features in some LTC and life policies.
Monthly payments from a reverse mortgage.
“Sweep” programs that bring interest from bank CDs, say, or earnings from brokerage accounts into the income stream.
Required minimum distributions from IRAs, Keoghs, and other such plans.
Income from other family members.
Loans of various kinds (life policy loans, loans against bank CDs, margin accounts, standard bank loans, etc.).

The list omits consideration of monies from government programs, windfalls, settlements and other potential sources. But it makes the point: Income planners need to be conversant with income aspects of a myriad of sources.

The income specialist may, in fact, need to work convergently–i.e., practice in insurance, securities and banking, or ally with experts in the three fields and also perhaps in real estate and accounting.

Most importantly, this planner needs to know how to structure the money flow so it meets individual client needs. Which product should the client use for income first? Second? Third? What are the tax consequences? How does the family factor into the decision? Medical issues? When to retire? Where to live?

It takes a highly skilled professional to work in that zone. No wonder some advisors are flummoxed.

Fortunately, in the past year or two, various financial interests have been examining those questions, and some have now kicked off solution-oriented initiatives.

For instance, the International Foundation for Retirement Education (InFRE), Lubbock, Texas, has developed a certification program called the Certified Retirement Counselor.

Meanwhile, the National Association for Variable Annuities, Reston, Va., and InFRE recently agreed to develop a new retirement income designation program. NAVA also plans to use InFREs Retirement Readiness Index. (Developed with funding from Congress, the Index measures how ready people are for retirement.)

Then, there is LIMRA International, Windsor, Conn. It is rolling out a Retirement Distribution and Planning course for producers and advisors. This is being distributed through LIMRA member companies that elect to offer it to their producers.

The College for Financial Planning, Greenwood Village, Colo., has programs, too. It offers the Chartered Retirement Planning Counselor (CRPC) for professionals who work with individuals, for instance. It also offers the Chartered Retirement Plans Specialist (CRPS) program for professionals who work with businesses. And its Certified Financial Planner certification program positions retirement planning as one of the six key elements in the course work.

A number of insurers have established retirement planning units or departments, and several software companies now offer programs to help specialists project how long a clients money will last.

Also, six retirement-minded associations have joined the National Retirement Planning Coalition, a new group spearheaded by NAVA. The goal is to promote awareness of the need to prepare for retirement.

Finally, many education and publishing firms have debuted materials and services that will arm specialists with the need-to-knows. And many associations now offer seminars, courses and materials on the subject.

Robert Burns, the 18th century Scottish poet, once said, “the spring comes slowly up this way.” Thats how some people feel about the income market, that its coming together slowly.

However, you can see from the above that its definitely on the way. What happens next is up to you.


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 2, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.