Let’s Talk about Your Client's M.U.G.

Ask your clients to think about their “M.U.G.” It’s an acronym created by the Alliance for Lifetime Income that represents the essential monthly expenses people need to cover in retirement, like your mortgage, utilities and groceries. It’s an easy way for retirees to look at what they’ll have to pay for, and then create a plan to help pay for those essential expenses with protected lifetime income from an annuity.

Explain it like this: M.U.G. is about taking the first step in planning for retirement by estimating your essential monthly expenses, which could include things like monthly medical costs, transportation, insurance premiums – or whatever you decide are normal costs you must pay for. After you’re done with that, take the next step by making sure that you have guaranteed lifetime income (the money you must have) to help cover some of those essential expenses.

Today, pensions and Social Security benefits barely cover all of retirees’ income needs, but an annuity can make up that gap. Academics around the world stress the importance of having a source of protected lifetime income in retirement portfolios – something that stocks, bonds and real estate just cannot provide. Adding an annuity to a portfolio has even proven to lower the risk and increase the returns of that portfolio. Furthermore, research has also shown that people with annuities in their portfolio tend to be happier and even live longer.

Financial advisors should start thinking of themselves as retirement income planners, not just investment advisors. Working together, financial advisors and their clients can discuss the simple strategy of looking at your M.U.G. to create a reliable retirement income plan.

Look at each of your clients’ unique situations from the lens of a retirement income planner. Consider how adding an annuity to a client’s retirement portfolio will ensure their ability to pay for essential expenses in retirement, regardless of how the market is doing, and talk to them about how covering their M.U.G. with protected lifetime income could help them achieve the retirement of their dreams.

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Tom Hegna is a senior education advisor for the Alliance for Lifetime Income. He’s the author of Retirement Alpha: How Mortality Credits Improve Retirement Incomes, and he was the host of the public television series “Don’t Worry, Retire Happy.”