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Portfolio > Economy & Markets > Fixed Income

Protecting Boomers from Themselves

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Over the next couple of pages, you’re going to learn a lot about John Zidan’s views on boomers and how to connect with that influential demographic. But before we go there, let me tell you my John Zidan story.

I went to visit Zidan in his hometown of Wadsworth, Ohio during the first days of March Madness. The night before our interview, I dropped by a sports bar for a burger and to take in the NCAA Tournament. I brought along a printout of Zidan’s website biography and plopped it beside my burger and fries, attempting to gather insight on the guy I’d be interviewing the next morning. Staring out from the bio page was a picture of Zidan, offering a friendly, open smile, the kind of guy who could enjoy a good burger and a basketball game.

During a TV timeout, I had a surreal moment when the commercial break featured the same guy who was on the piece of paper. I did a double take between the two Zidans.

What I found out then and would continue to learn about over the next 24 hours is that Zidan is kind of a big deal in Wadsworth. With his Retirement First advisory business and a weekly TV show, he’s become a local celebrity who gets recognized on the street by people who have heard his message either in person or on the small screen and they want to talk with him about his favorite topic—safe money.

As Zidan would tell me, protecting clients from themselves is one of his key goals as an advisor. Sometimes they don’t see the benefit in “The Power of Zero” — that is, until Zidan has the time to explain it to them.

When he does bring clients into his office, they find a place that’s unique among financial offices. First of all, there’s a café on the premises with fresh pastries and hot coffee. On the other side of the wall is a professional-grade chef’s kitchen, the kind you see on the Food Network. For seminars and events, Zidan hires chefs to prepare lobster and filet mignon. Oh, and if someone has to use the bathroom while at the office, they’ll find a heated toilet seat among the many amenities.

As Zidan told me, “I want to treat my clients like royalty.” After touring his office, it’s hard to argue that fact. 

Senior Market Advisor: As a boomer yourself, how has that allowed you to have a unique perspective into how they save, invest and prepare for retirement?

John Zidan: I say to them: “As a boomer, all your investments in a 401(k) are taxable when you take distributions as income. As a boomer, the stock market is controlled by hedge sales and short sales and inside information and, most importantly, the media.” So as a boomer, they need to protect all of their assets, keep all of their gains and keep it tax deferred. The reason is that when they retire they will get hit with 28 percent federal and 6 percent state [taxes], and 85 percent of their Social Security will be added to their adjusted gross income. The solution for me and the baby boomers is to position myself in a fixed annuity/indexed annuity, which allows me to lock in the gains, have no losses and receive a guaranteed fixed rate of return of 6 percent, 7 percent or 8 percent with an income rider. That gives me the ability to receive a retirement income when I need it, which is guaranteed for life and has to stay tax deferred, thus allowing me to outpace inflation. One of the most important things for me is to try and put as much money in a Roth IRA as I can, since it is not taxable when I retire.

The most important thing for myself and my baby boomer clients is that the largest percent of our income goes to taxes at 32 percent. So, we need to protect our assets and keep them tax deferred and tax exempt.

SMA: What do you see as the primary challenges facing boomer clients?

JZ: Trying to maintain and hold onto their job. Taxes are being placed on the middle class. In a two-income family, it takes six months to pay the bills, and six months to pay the taxes. If they lose their job, trying to pay their bills with the losses in the stock market and then having to pay taxes on their income with no job is very difficult. Also they can be hit with a 10 percent penalty and full taxes because they are not 59-and-a-half when they take a distribution from their 401(k). Lastly, they are trying to deal with inflation.

SMA: What are some of the major differences between older-generation seniors and the new, boomer retirees?

JZ: The older-generation seniors are sometimes the children of the Depression. They are running scared. They hold onto their money and crave 100 percent liquidity and seek protection with the banks. By doing so they are not keeping up with inflation and causing themselves more taxes in the form of 1099s on their gain, which forces their Social Security to be taxed at 55 percent or 85 percent when added to their adjusted gross income. New boomers need a two-family income, so they put all their money in the stock market and disregard what the media is clearly telling them is happening. Simply put, they are playing the slot machine in Las Vegas, hoping to hit the jackpot. Lastly, they usually don’t understand that all that money they have saved really has a big chunk going to their favorite charity, Uncle Sam. 

SMA: What types of products do you emphasize for your boomer clients?

JZ: Fixed or indexed annuities, which protects the principal, locks in the gain and keeps it taxed deferred. And, have at least six months of your salary in an account that is liquid. Buy life insurance to overcome taxes on your spouse and your beneficiaries because it is income-tax free.

SMA: What are the biggest objections boomers have to safe products and how do you overcome those?

JZ: The number one objection from the client is trust. They don’t know you and don’t trust you. The biggest example being Bernie Maddoff. You’ll run off with their money and they’ll never see it, horror stories like that in the media. What if the company goes under? The surrender charges also scare the client.

I overcome the fear of surrender charges by telling them there is a price for liquidity. How much is peace of mind worth to you? Would you rather have 50 percent gains and no losses or 100 percent gains and 100 percent losses? Their final objection is wanting to keep their money in the stock market; I overcome this by the “Power of Zero.” If the market crashes, they stay the same; when the market rises, they go up without having to start from the bottom and work their way up. Simply put they don’t have enough time to go back and earn the money they have spent a lifetime acquiring.

For more exclusive boomer coverage, see:

Marketing to Boomers: Where Did My Retirement Go?

5 (More) Ways to Connect with Boomer Clients

How I Fixed My Boomer Clients’ Retirement


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