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August 03, 2008 at 04:00 PM
Today, as before, the silent generation is still saving money, said John R. Mueller, CLU, MSFS, principal of John R Mueller Insurance, Brookfield, Wis., chartered financial consultants. They are in their 70s and 80s, and they are saving their money for their children and grandchildren.
“They are still a group of proud hard-working folks, secretive and independent. They don’t want their children to know everything–how and what they are doing. Nor be a burden to their children.”
A specialist in qualified plans and retirement planning, he spoke in a breakout session here at the annual meeting of Million Dollar Round Table in June. His goal, he said, was to offer ideas to advisors on how to open up a discussion with seniors–”not to scare them, rather to educate them”–and to introduce them to fixed guaranteed tax-deferred annuities, which he described as “a nest of dollars they do not want at risk.”
“Work is still the mantra of this generation. They shovel their own walks, cut their own lawns, and are proud of their homes. They are a generation that will drop off forms or a check at your office to save you the postage cost. They still make homemade bread and cookies for their neighbors. They take their savings passbook to the bank to make sure everything is added up correctly.
“Despite the computer and cell phone age we live in, they would rather visit one on one with someone–someone to educate them as to what they should do with their hard-earned savings,” Mueller said.
A sole practitioner for 30 years, Mueller said he has built his practice by focusing on qualified plans for small businesses and retirement planning for people ages 55 and up–assisting them, he said, with their “money in motion” decisions on where to invest their “safe” money.
If financial professionals learn to appreciate and listen to the stories this generation has to tell, the members “will trust us to educate them,” he said.
What do these seniors want and what are they worried about? A good fact-finding meeting with a senior, focused on suitability, is a good place to start, Mueller said. “Find out what they want for their money. Most seniors will tell you that they want their money to be safe, a good rate of return, and access to the money if needed.”
As for concerns, they worry about their health, legal issues, family, taxes they have to pay and their investments, he continued, noting that he gives particular focus to the worries about taxes and investments.
“I ask them: where do you invest your safe money?” he noted.
For many, he said, the majority of the safe money is in taxable bank certificates of deposit or in savings passbook accounts. “Seniors love to look at their bank account balances,” he explained.
“I confirm with them that it is important to have some safe money in the bank, but how much is enough?” he said.
“I ask them, ‘do you need interest income to live on, or are you simply renewing your CDs at the bank because it’s easy, or is it because of a seemingly favorable short-term advertised bank rate? Have you ever considered whether it makes good income tax sense to continue this?”
“They reply, ‘What do you mean, John?’”
Typically, he continued, their knowledge of the benefits of tax deferral is limited.
So he said he shows a chart of tax-equivalent yields, saying “here you can find your tax bracket based upon your current taxable income, whether single or married.”
He shows an example of clients with a taxable family income of over $65,100, who will be in a 25% federal and 6% state income tax bracket. “I ask, ‘What is the taxable interest rate you are earning at the bank on your CDs? In your 25% bracket, are you earning 5.8%? Are you earning a better taxable rate than a tax-deferred rate? This table compares those yields.’”
