Thought for the day:

“Never put at risk, money you already have, for something you don’t need”

Willis Allen…. as told to me by Larry Osborne

 

If you will read no further:

The biggest risk most of your retired clients face is longevity.  The longer they live the greater the risk.

Risks to their portfolio from the economy and an uncertain world, over which they have no control and health risks that can destroy their wealth.  Have you done your very best to include strategies in their portfolio that provide guarantees that protect their lifestyle from these risks?

 

Thought for the week:

Having been a CFP for almost 40 years I totally embrace many common concepts of money management and asset growth.  But I also have a great appreciation for (and knowledge of) the legitimate role of insurance products properly included in the portfolio.  It saddens me to see folks who have built a respectable portfolio of assets under the rules of the last 30 years who are yet to understand the New Rules going forward.  Their rules are different for several reasons.

1. They are now in the last 20 (more or less) years of their lives which will require them to live off the assets they have built up,
2. They will reduce their spending as they move through the “Go-Go years” in early retirement to the “Slow-Go years” as they continue to age.
3. At some point, most will experience diminished capacity when many of them will need assistance with activities of daily living.

Advisors should understand the needs of their clients and recognize that older clients have an even greater need for more predictability and less uncertainty in the plans you provide them.  For example, 2008 was serious; but younger clients have time to recover and can still be positive about the future. Clients in their 70s and 80s experienced much greater stress.  In 2008 your 75 year old client was very nervous when she saw her portfolio take a serious hit.  It has now recovered and we are ready to experience yet another “event” in the next year or two.  She will be 81 or 82.  Are you ready to start all over reassuring her that things will get better?  What if she is taking out more money each month to pay for care, will that help her recover in a timely fashion?  Will it make it more difficult to reassure her? She should be offered products and strategies to assure that she will have extra money to pay for eventual long-term care; and that there is basic monthly income that will be there every month as long as she lives, no matter what.  The products and strategies we offer do just that, and should be included in a well balanced portfolio.

 

Something to think about:

The great bull market of the 70s-90s was substantially driven by the baby boomers.  They earned and spent us into a period of growth and increased value of everything around us.  But now they are retiring at the rate of 8,000 per day.  They will be spending vs. investing but they will be spending much less than during the last 25 years when they were driving the economy.  Now the GenXrs and Millennials will be much less well-off due to increased taxes, reduced income and reduced growth. How is that going to affect your ability to build wealth in a financial portfolio?  What annual rates of return should your clients expect?  Taxes will be going up. What impact will that have?  Once average ROR reside in the 5-7% range, it becomes more difficult to outperform insurance products.  It might be a good idea to get more accomplished at including them in your recommendations.  We can help.

A client with 100k to “invest” safely could put it into an index annuity with Genworth and receive an interest rate each year equal to the increase in the S&P up to 5.75%.  If he has $250k his max goes up to 5.95%.

Of course that cap will change every year, but if it goes down more than 50bps below the initial rate, the client can take his money out free of surrender charge which reduces annually to zero over 7 years.  So if he can do better elsewhere he can move on without cost.