Simplifying the Retirement Story

By James Lake

With an ever-changing retirement landscape, preparing for your clients’ retirement reality has never been more important than it is today.

Clients of all ages are seeking a personalized approach to their retirement, as well as information to help ease their retirement fears. Whether it’s outliving one’s savings, rising health care costs or maintaining a desired lifestyle, retirement worries are top of mind, but a path to a confident retirement is possible with the right information and discussions. In fact, a study from Guardian reveals 87 percent of millennials say knowing more about financial services and products would help improve their confidence in reaching their financial goals1. Thus, it’s time we take a step back and simplify the retirement story by starting with tools, content and conversations that can benefit a client.

As a financial professional, it’s critical to be able to speak to all the different aspects of a client’s retirement. It requires taking a 360-degree view, including matters related to health, home, lifestyle, relationships, and money. Use these areas to start meaningful discussions around retirement and build an understanding of your client’s mindset. By connecting with clients to discuss their custom preferences and needs for retirement, advisors position themselves beyond simply offering products – ultimately, they can uncover a client’s changing needs, forge meaningful connections to build deeper relationships and deliver valuable resources.

 Active Engagement Comes First

Retirement means something different to everyone and these days it requires more planning than ever before—it’s a personal process and can invoke lots of questions and emotions as it relates to an individual’s retirement reality. The retirement marketplace is full of products, data, and technical jargon that can overwhelm clients. To aid clients of all ages, it’s important to provide tools to help do some discovery in a product agnostic and educational manner. Doing so helps clients understand their income and lifestyle priorities and will help them identify clearer retirement objectives and can lead to more meaningful conversations between them and their financial professional. This type of simplified engagement can educate clients in a personal and conversational manner. When our financial professionals provide tools like this, it helps the client feel like they have a true advocate supporting them.

As an example, Guardian released two digital online tools – one to help clients quickly discover their income and lifestyle priorities, the other to help elevate their understanding of guaranteed and non-guaranteed sources of income in retirement. These interactive tools are starting points to better enable a more meaningful and productive interaction with their financial professional. The tools also provide the client with the opportunity to drive the conversation around what matters most to them.

It’s about guarantees

Once adequate resources, conversations, and tools are provided to help clients understand their retirement objectives, they see opportunity to reduce risks and ensure more guarantees later in life. Then products that could benefit them based on their individual scenarios take on a more important and meaningful role. It’s best to ease into product conversations that provide guaranteed income in retirement, such as whole life insurance and annuities. While the primary purpose of life insurance is the death benefit protection, it is important to understand the advantages that cash value accumulation can provide to clients, including supplemental income during retirement. Helping clients understand if there are income gaps in their plan for retirement as well as prepare for unexpected costs is where the financial professional can also add value. It’s important for the client to know how these products help them meet their goals and align with their objectives.

With 76% of Boomers concerned they won’t have enough money to last them through retirement,2 a guaranteed stream of income for a set period can help make them more financially confident. An annuity can be a valuable product solution for creating guaranteed income in retirement, but there’s confusion in the marketplace about their flexibility. Some consumers may dismiss them because they don’t know enough about how annuities work and the difference between one annuity or another. The financial professional can help minimize confusion around annuities, especially since they are a way to safeguard against running out of money in retirement – one of consumers’ biggest fears. Plain and simple, an annuity can provide lifetime guaranteed income every month regardless of market results to be used for monthly living essentials, unexpected health care needs or anything the client wishes to use it for. Creating guaranteed income in retirement, specifically through annuities, can be a critical component to one’s retirement plan.

Annuities can also provide tax advantages in retirement, which can be attractive to many clients. The money that is contributed to an annuity is tax-deferred, meaning taxes are paid out once the money is taken out of the account. Not only would the client be receiving guaranteed monthly income, but there is also the potential for annuity payments to include interest earned on the client’s contribution, which grew tax-deferred until payout. This is especially true with fixed deferred annuities as you’re guaranteed to earn a minimum amount of interest on the contribution and while interest rates tend to be lower, they provide a predictable stream of income one can count on. Another advantage might be that when annuity payments are made and taxes are due, the client will likely be in a lower tax-bracket because they are retired and thus incur a lower tax bill.

It’s important to ensure clients understand how annuities can work to provide income in retirement. This level of flexibility can support many clients’ retirement objectives and can keep cash flows from running dry. For example, some questions to ask may include: How soon would they need the money? Do they want payments for life or for a certain period of time? Do they wish to have their money tied to the market or would they rather a fixed amount? Do they want access to their money? Do they wish to leave money to loved ones when they’re gone?

It’s well-known that the cost of living during retirement often increases for many—due largely from rising health care costs, overall inflation and housing costs, and even paying off debt. These are some of the most essential retirement risks to take off the table when planning for retirement. Whether a financial professional is taking a holistic approach to planning with their clients or not, annuities and/or products that can provide guaranteed monthly income is critical to the conversation.

Educate and be transparent

First, make sure the client understands what type of annuity you’re recommending and why it best suits their financial goals. Like all retirement plans, using a fixed, variable or indexed annuity all depends on the client’s goals and how risk averse they are—everything should be tailored specifically to an individual client’s preferences.

Be transparent about the costs and schedules involved with specific annuity benefits. Some annuities will have penalties for accessing money early. Clients may also be subject to a federal tax penalty of 10% if they make a withdrawal before they’re 59 and a half. Be clear in outlining both the benefits of the annuity as well as the considerations – taxation, qualified or non-qualified, age considerations, optional benefits, etc. This will only help build trust with clients and strengthen your credibility and relationship.

As a financial professional, remember your first step is to understand the clients’ retirement and financial goals. Let them discuss their needs and concerns and give them time to explore available tools and content to paint a stronger picture of their retirement story. Then help them outline the gaps. At that point, it’s appropriate to discuss what products can benefit them. Building a holistic retirement plan and simplifying the process through engaging self-reflective resources and tools helps simplify the conversation and allows clients to better understand what they want and the types of products that can lead them to a confident retirement reality.

Annuity guarantees are backed exclusively by the strength and claims paying ability of the issuing insurance company.

 James Lake is vice president, head of sales, disability and retirement at  The Guardian Life Insurance Company of America. Lake is a registered representative of Park Avenue Securities (PAS). OSJ: 7 Hanover Square, New York, NY. PAS is an indirect, wholly-owned subsidiary of The Guardian Life Insurance Company of America® (Guardian), New York, NY.