The question was: What is a good way to determine the suitability of using an annuity as part of an income plan for my clients? The answer is: “Once the know-your-client process is complete, there are many techniques to determine whether an income annuity is a suitable solution. The following six steps represent just one of those techniques for consideration and adaptation: ” 1) Inventory those dependable sources of income, such as Social Security, other government programs, pension plans, or other reliable sources proviging monthly income (e.g., the monthly payments as a result of the sale of an asset).
” 2) Add up the total reliable long-term monthly income available to meet the cleint’s needs found in Step 1.
” 3) Determine the client’s wanted/needed monthly income to maintain the standard of living.
” 4) Determine the X factor, which is the currently available monthly income short fall from the desired income. The X factor is the difference between the desired income determined in Step 3, and the available income calculated in Step 2.
” 5) Multiply the annual X factor by by twelve to determined the annual X factor.
” 6) Multiply the annual X factor by twenty in order to determine how much capital generating a 5 percent X factor net annual return would be sufficient to provide an amount of income equal to the annual x factor.” Excepted from Retirement Income Planning, 1st edition, Retirement Income Planning, a book in the Tools & Techniques series published by the National Underwriter Company, Cincinnati, Ohio. The co-authors are Stephan R. Leimberg, Benjamin G. Baldwin, Aaron Coates, Robert S. Keebler, Michael E. Kitces, and William J. Wagner. Rick Kahler is a contributing author.
Recommended Stories
Medicare Advantage Enrollment Climbs
Medicare managers' new spreadsheets suggested that Medicare drug plan growth may have stalled.
Integrity Marketing Acquires Senior Select
The distributor will now generate about $200 million in new final expense life premium revenue per year.
This One Weird Word Could Blow Up Your Sales Standard: NAFA to NAIC
Pamela Heinrich says using the word would create a 'tripwire.'
Resource Center

White Paper
Sponsored by American Portfolios
Delighting the Customer: The Importance of Customer Perception
Making sure customers are satisfied is no longer enough. Discover six ways to delight your clients, while solidifying your bond.

White Paper
Sponsored by FTJ | FundChoice
Preparing Clients for Any Market Scenario -- An Advisor's Guide to Market Movement Strategies
You need a way to effectively manage client expectations, especially when the market makes erratic swings. Answers to three key questions will give you a great place to start.
ThinkAdvisor

Don’t miss crucial news and insights you need to make informed investment advisory decisions. Join ThinkAdvisor.com now!
- Free unlimited access to ThinkAdvisor.com which provides advisors, like you, with comprehensive coverage of the products, services and trends necessary to guide your clients in making critical wealth, health and life decisions.
- Exclusive discounts on ALM and ThinkAdvisor events.
- Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Copyright © 2019 ALM Media Properties, LLC. All Rights Reserved.