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MDRT INSIGHTS

How To Make Sure Your Clients Have Income For Life

Our retired clients and those planning to retire soon are facing some of the most challenging planning decisions of their lifetime. Our ability as advisors to have an impact, give direction and protect retirement income has never been as great as it is today. Following are four methods to help protect your clients from whatever the future may bring so that they can better enjoy a retirement free of financial worry.

First, build a solid buffer account. Do your clients hold 12 to 24 months of their fixed expenses in a cash account for emergencies or opportunities? Guard your clients against liquidating a portfolio in order to meet unanticipated expenditures during a severe downturn. If you have not helped your clients build a safety net of cash assets, consider helping them add this essential ingredient to their overall financial plan. We all know interest rates are virtually nonexistent and our clients may be quick to point out that fact. Remind them that it is not "what you make, but what you keep" that will count in the long run.

Second, if your clients have debts, liquidate them! This is especially important if they have any variable loans such as home equity credit lines or unsecured revolving debts. Between the stimulus, the "bailout" and the quantitative easing, our country faces the real possibility of inflation due to the influx of money into our financial system. This may result in significant interest rate increases on variable rate loans.

Third, make sure your clients have sufficient guaranteed income every month. Many older retirees enjoy defined benefit pension plans, but for "newly" retired clients the defined benefits have been replaced with defined contribution plans. Review Social Security benefits and determine how and when these benefits should begin. It may be more advantageous to delay the start of benefits than to take them at age 62. For example, each year that clients delay their benefits they receive a guaranteed 8 percent increase on the monthly benefit check. If they delay receiving benefits until age 66, they will collect 32 percent more for life and enjoy the possibility of cost-of-living increases! For clients who are looking to retire early and are considering benefits at age 62, discuss the feasibility of "building an income bridge" for the years prior to reaching "normal" retirement age. This can be done via portfolio distributions, savings or an immediate annuity.

If Social Security and pension are insufficient to cover the fixed expenses, augment the income via immediate annuities and variable annuities with guaranteed benefits. More information about these techniques can be found by visiting the Million Dollar Round Table's website at www.MDRT.org. There are numerous resources just a click away to provide you with the information you can use to help your clients.

Fourth, clients who successfully establish the buffer account, pay off variable rate debts and secure a fixed-income stream should then construct a wellbalanced, diversified portfolio for their long-term retirement assets in order to fend off inflationary pressure over time. If your clients have a reduced reliance on the retirement account for their basic living standards, they can focus on longterm goals and objectives knowing the short term is covered.

Establishing your clients' retirement plans around these basic principles will enable them to worry less during difficult economic periods. Building a solid safety net and a steady stream of retirement income creates the opportunity to take advantage of market swings and rebalance portfolio assets to capture the eventual rebounds. Guide your clients to "time in the market" not "timing the market" by providing a steady stream of income, and they will spend more time enjoying and a lot less time worrying about their finances.

Gregory B. Gagne, ChFC, is an 11- year MDRT member with four Court of the Table and two Top of the Table honors. He is the owner of Affinity Investment Group, LLC, in Exeter, N.H., and is past president of NAIFA New Hampshire. For additional information, [email protected].


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