“The longer you live, the more likely you are to be impacted by market crashes, the more likely you are to one day need long-term care, the more likely you are to run out of money,” said Tom Hegna, in a conversation we shared at NAILBA 33, being held this week in Hollywood, Florida.
I get the same reaction each time I talk (or rather, listen) to Hegna: Initially, it’s one of fear, but then I realize what he’s telling me is the antidote to fear. Hegna, a former First Vice President at New York Life, retired Lieutenant Colonel, and economist is one of those straight-shooters whose words can feel like a gut punch, but eventually his words are a wakeup call.
“We have to take longevity risk off the table. Longevity risk is the number one risk in retirement,” Hegna said.
“Tom, how do we get that done?” I asked.
“Social Security can do it,” said Hegna. “A pension can do it as well. Also, you can go with an annuity from an insurance company to get that longevity risk off the table. People think annuities are bad. That’s not the case.”
Hegna added that consumers are “fed this information by the likes of Dave Ramsey and Suze Orman, but they are not accurate in their portrayal of annuities. They think all annuities are variable annuities with high withdrawal rates. No! Annuities are all about taking longevity risk off the table.”
“But we’re still faced with a perception problem,” I said. “How does the industry overcome that?”
“You’ve got to change the perception by using math and science,” Hegna said. “You can look at the studies conducted by Nobel Prize Winners. They all say consumers need an annuity to guarantee lifetime income.”
In 2012, Hegna told me, “Retirement is now primarily a two-fold challenge. First, retirees need guaranteed income more than ever, but fewer people have it than ever before. In the Social Security program, there is about to be a massive shift from people contributing to the program versus people taking money out, which is likely to lead to reduced benefits. As for pensions, unless your client works for the state or federal government, this benefit is probably no longer offered.”
He hasn’t backed off from that stance. He now says that Social Security, with some tweaks, will make it another 100 years, but pensions are a different story.
“Pensions are a little scary these days. Most corporate pensions are going to be ‘okay,’ but government pensions have overpromised. It’s concerning to me that pensions haven’t been treated as sacred. These issues leave annuities as the solution.
“Your retirement is not about accumulation,” said Hegna. “That alone will not get it done.”