Thought for the day:

Tomorrow: (n) a mystical land where 99% of all human productivity, motivation and achievement is stored.

Think about it:

When creating a retirement income strategy, IRR is largely irrelevant once it is adjusted for the risk of outliving your assets. Living without assets is so much more painful than dying rich, that people who have not annuitized a portion of their retirement assets will either draw down less than they could otherwise afford (which by definition would make the IRR useless to lifestyle), or run a risk that they can’t afford at all.

Thought for the week:

Everyone is running from their bonds lately; but not from their fixed annuities.  My mom has a fixed annuity that continues to pay the same safe rate as it did four years ago.  While bonds have tanked, she just keep on clicking along….tax deferred I might add.  Her stocks have done well this year too and the overall risk in her portfolio is qulite manageable.  Conventional wisdom tells us that fixed insurance and annuity policies carry a low return and are not very efficient in a portfolio.  But studies from the Wharton School (and my mom’s personal experience) tell us that the various insurance products are just another asset class with a significant role to play in modern portfolio theory.

By properly combining these non-conforming assets with a portfolio of stocks, one can achieve the highest returns in the overall portfolio while minimizing the clients’ overall risk.  Tolerance for risk is generally (and no doubt should be) reduced among older clients; and they depend on us to manage their portfolio to last as long as they do.

Life insurance for younger clients is a great way to systematically build a basic retirement account that can be designed to create tax free accumulation and tax free retirement income that will compete very nicely with stocks and bond portfolios while addressing the risk of dying too young or living too long.

Quote of the month:

“I almost dropped my teeth”, she said.  “I mentioned to my client that we should set up a strategy for long-term care and that I had a way she could take care of it without paying premiums for insurance.

She was actually very interested.

When I explained MoneyGuard to her, I was amazed at how quickly she embraced the idea. Now she is introducing me to her bridge club.”

When you show your clients how they are actually better off with insurance than without, you will be amazed by the response.

If you are a female advisor:

Have you taken care of your own long-term care planning?  I assume you practice what you preach when it comes to investing your portfolio.  But have you set up a strategy for eventual long-term care?  Now is a great time to do this for yourself and your clients before the rates go up on conventional LTCi policies.  As I mentioned last week, rates are due to go up by as much as 30% for females beginning in September with most companies rolling them out over the next four months.

The linked-benefit products are a better deal if you have the money, but they too keep offering reduced benefits as interest rates continue to reside at historical lows.