As financial advisors, we have substantial roles in our clients’ lives as they plan for retirement. Some of us might have experienced a recent role increase due to what some have called “the worst financial crisis since the Great Depression.” As trusted advisors, this is a time that we are called upon by our clients for our professional and financial acumen.
While others wring their hands about the stock market and the state of our economy, it is incumbent upon us to use this as an opportunity to further educate and prepare our senior clients for their future. One way we can do this is by proactively advising them about the “lifeboats” that can protect them and their loved ones from the harsh realities of life.
There are three major lifeboats every senior should consider.
The first, annuities, provides guaranteed income that cannot be outlived. Along with Social Security, pensions and military retired pay, annuities provide income for daily living expenses without requiring withdrawals from long-term savings and investments. Annuities also enjoy the power of tax deferral, so earnings are not taxed until withdrawn, allowing money to grow faster.
Another lifeboat, long term care insurance, ensures individuals receive the care they need–whether at home or an assisted living or nursing home–without unraveling the financial portfolio of a spouse or family member. This is a critical factor during a time when withdrawing investments or savings to pay for long term care in a deteriorating market compounds the financial burden.
Statistics show that when markets are declining as individuals withdraw savings for things such as long term care, their portfolio will never recover. On the other hand, if individuals do not withdraw retirement income during a downturn and leave it as is for the entire cycle of the market change, they greatly improve the sustainability of their life income.
The final lifeboat, life insurance, provides a tax-free death benefit to replace money that was needed to maintain financial dignity, which assures a legacy for family members, charities and other important personal obligations.
As Americans live longer, healthier lives, it becomes increasingly vital to take advantage of this financial option.
Life income and lifeboats are directly related. The importance of this understanding for our clients is evident now more than ever. Lifeboats can provide peace of mind to so many during these turbulent times.