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August 13, 2006 at 04:00 PM
Most people spend their entire working lives with the expectation of income on a regular basis. We work, we get paid. Whether on salary or commission, we’re conditioned to having a regular source of income.
Many baby boomers responsibly have saved a significant amount of money during their working lives in anticipation of the moment they can walk away from their jobs and live their lives on their own terms. But have they prepared themselves to walk away from a paycheck?
If not, the single premium immediate annuity should be a consideration.
When soon-to-be retirees stop working, most will stop receiving a paycheck. They have their savings, but how can they ensure that they won’t outlive it? They are being thrust into a new chapter of life without the comfort and security they have had for over 30 years–a regular income.
As advisors, many of us are partially responsible for the circumstance. That’s because we have not had the proper conversations with clients, and they now are unprepared to deal with the shift in how to manage their finances in retirement.
In 2005, a total of $216.4 billion of annuities were sold in the United States, according to figures from LIMRA, Windsor, Conn. SPIA sales represented $5.3 billion, or less than 3% of the total.
As a former sales manager of mine once said, “The numbers never lie.”
These numbers reveal that advisors are doing a grave injustice to clients by plucking clients from their current comfort zone of having a reliable income and confronting them with the risk that they could actually outlive their retirement savings.
There are a number of factors eroding the safety net of the senior population. People are living longer and the costs of doing so are increasing substantially. People also are retiring earlier than ever.
With increasing health care costs and decreasing retirement benefits for an aging population, baby boomers must be smarter about retirement planning.
The numbers never lie. People are working less and collecting more. Even the most inexperienced mathematician can see this path is unsustainable. Advisors owe it to clients to help them understand what they can do to ensure they won’t outlive their savings.
