Every 10 seconds, for every hour, for every day, for every month, for every year, for the next 15 years. That’s how often a Baby Boomer will turn 65. Starting now, their attention turns to retirement, and they worry. Will they have enough pension income or assets to retire? How long will their retirement last? Will they live too long and outlast their income? Will they need to provide financial support for their parents? Will their children, in turn, need to take care of them as they age or become infirm?
These are just some of the questions that call for professional advice and solutions – solutions that you can offer. When working with Boomers, you will need to provide guidance in prioritizing the problem areas and providing reasonable solutions.
The Baby Boomer generation can look forward to a long life expectancy, with many living into their 90s and beyond. In fact, there is a one in three chance of at least one spouse of a healthy 65 year old couple living beyond age 95. This means that a prime concern for the Boomer generation is the possibility of living longer then their money will last. Many national financial publications are now addressing these concerns with articles about immediate annuities, including the Wall Street Journal.
The SPIA solution
While single premium immediate annuities may not have a lot of glamour, they certainly solve the problem of living too long. A SPIA can provide income for the Boomer’s lifetime, or even beyond, depending on the income option chosen. The newly designed SPIAs even provide the ability to withdraw part of the income in a lump sum in the event of an unforeseen financial emergency. Another option provides a lump sum death benefit at the annuitant’s death. This gives additional peace of mind for clients who are concerned about locking up their assets.
Even variable annuities are addressing the concerns of living too long. VAs now have guaranteed income withdrawals that can last the lifetime of the annuitant. If FINRA truly understood the options now available in variable annuities, perhaps our industry would not be dealing with the regulatory concerns we are now facing.
These new annuity designs and options may be just what your prospects and clients need to help them gain the peace of mind of knowing that they cannot outlive their income.
A closing thought
Review your client files to find policies where the cash values are very high in relation to the death benefit. In these cases, the net amount at risk, the insurance element, is very small. The client is basically self-insuring. If the need for life insurance is no longer there, perhaps the time is right to suggest a 1035 exchange from the life insurance into a lifetime income annuity. The basis of the annuity will be the basis from the life insurance providing a substantial portion of the annuity income tax free as a return of basis. You might even find enough new income to fund a long term care policy, which will in turn address another Boomer concern: encumbering their children with the cost of a nursing home or expensive home care.
A lifetime of income. Peace of mind. All part of the magic of our industry.
Marvin H. Feldman is the president and chief executive officer of the LIFE Foundation. He can be reached at firstname.lastname@example.org
For past life insurance coverage, visit ASJ’s Life Insurance Resource Center.
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