Treating Retirement As Part Of Lifetime Planning

He stressed that he does not just mean selling long term care insurance but, rather, “positioning assets to help with the care phase of life.”

Selling a laddered set of split annuities, spread over the retirement years is one example. It is “saleable” and “keeps the agent in front of the client” throughout the retirement years, he maintained. The plan assumes that equity index annuities will be used for the single premium deferred annuity side of the equation.

Concerning EIAs, Parker predicted that their sales will continue to explode over the next 18 months, due to continuing market nervousness and the possibility that interest rates may go down in the wake of Hurricane Katrina.

Also, EIAs appeal to buyers looking for safety of assets and ability to participate in the market indices via the policy crediting rate, he said.

Another EIA advantage of emerging importance is the product’s ability to enable owners to control when they take their money out, Parker said.

One can take away liquidity risk by using products of differing durations, he suggested. For instance, use a 6-year EIA, an 8-year EIA, a 10-year EIA, and a 12-year EIA, all with partial liquidity (for unemployment, nursing home confinement, terminal illness and annual 10% penalty-free withdrawals).

Layered that way, after the first 6 years, the advisor and client “can go back to the plan and see what to do with 25% of the risk,” Parker said.

The client gets tax deferral and tax efficiency, he said, as well as “great liquidity,” with one-fourth of the assets fully available after 6 years.

When setting up plans like this, advisors and clients should be sure to discuss what type of contingencies are in place, should the advisor later leave the practice or die, he told NU. The contingencies would address how the client will receive the planned regular reviews if the advisor is no longer there.

The EIA is a “basically boring” product, he said in his closing remarks. “You give us your money and we guarantee we’ll return it at a fair return.” But that story becomes “compelling,” he said, “once people get into the payout and care years” and start looking for security.

The industry will need to come up with designs that ‘take the fear out of care’