Podcast Center
Video Center
Webcasts
Resource Center
Events
July 10, 2012 at 09:05 AM
Your baby boomer clients and prospects have a lot on their minds. They’re concerned about having enough money to live on in retirement, rising medical and long-term care costs, and providing for the people they love. For many, the number one priority is having a guaranteed lifetime income stream to ensure that they do not outlive their retirement savings.
Their worries are well founded. Just 14 percent of workers say they are very confident they will have enough savings to retire comfortably, according to a 2012 Employee Benefits Research Institute (EBRI) survey. Sixty percent report that the total value of their household’s savings and investments, excluding their primary home and any defined benefit plans, is less than $25,000.
With many people on their own when it comes to making vitally important decisions, the need for skilled advisors is greater than ever. For some clients, an emerging optiona single product designed to address multiple needsmay be an excellent solution. A combination product allows clients (and their advisors) to customize an annuity, adding optional riders for enhanced death and extended care benefits. A multi-need product like this provides very competitive flexibility and security.
Combination products also address a common roadblock to sales: People’s hesitancy to buy a product they may never use. With these products, clients are guaranteed to derive a benefit.
The marketplace is embracing combination products and their growth is expected to accelerate as the number of retirement-aged people with multiple needs rises.
The three scenarios that follow outline the three key issues baby boomers faceensuring a dependable income stream in retirement; covering fast-growing health-care and long-term care costs and providing for their familiesand ways producers can help address these issues.
Guaranteeing an income stream
The need to create a dependable income stream in retirement has never been greater. A limited number of people have defined benefit plans, and many believe Social Security has an uncertain future. Savings took a hit during the recession, and people are leaving the work force earlier than they planned. According to the EBRI survey, half of current retirees said they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure.
An annuity with a GLWB rider can be used to meet a range of income and asset-protection needs. In particular, indexed annuities with GLWBs have become more popular over the past few years, both for the guaranteed income features and the downside protection they provide.
GLWBs can also accommodate clients with different income horizons. Clients looking to begin a stream of income immediately or within a few years may have come up short on their retirement savings because of investment losses or other setbacks. A GLWB rider tailored for clients with near-term income needs might provide an upfront bonus to the benefit base to provide an immediate additional value.
Clients with a bit more time before they need income can benefit from an accumulation period of four to 10 years while income is deferred. A GLWB rider tailored for these clients might provide a guaranteed growth rate during the deferral period. For instance, a specified growth rate might be added as simple or compounding interest to the benefit base each year the client defers the start of withdrawals. The longer the deferral period, the higher the level of guaranteed retirement income.
