What Is the Social Security Administration?

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Almost all working Americans eventually receive Social Security benefits. These funds are collected and distributed by the Social Security Administration, a federal agency that serves to fight poverty. The SSA’s programs pay benefits to about 70 million people including retirees, children, widows, widowers and those with disabilities. It can be helpful to understand how the agency works and what it offers. Here’s a look at what the Social Security Administration provides and how its major programs work.

What Is the SSA?

The SSA stands for the Social Security Administration, and it was formed in 1935. Taxes are used to fund the agency, and payments are sent out to qualifying Americans. During its initial years, the SSA paid benefits to retired workers. In 1939, the agency added benefits for spouses, minor children and the survivors of deceased workers. Disability benefits began to be distributed in 1956. The agency also plays a role in Medicare enrollment.

Programs the SSA Provides

There are several main types of benefits the SSA pays out to individuals. These include payments to retired workers, those with a disability and survivors. Here’s a closer look at the SSA’s major programs:

Social Security retirement benefits. This program focuses on providing Americans with income after retirement. For those who have paid into the system, SSA issues monthly payments based on their 35 years of highest income. You can choose to take Social Security at your full retirement age, which for many people is age 66. You also have the option of taking it as early as age 62 or as late as age 70. “When to start taking one’s Social Security benefit is one of the biggest decisions most will make in retirement,” says Tim Wood, founder of Safe Money Retirement in Johnson City, Tennessee. The right time to begin benefits could depend on your health, working preferences, earning level and lifestyle choices in retirement.

Social Security disability benefits. Social Security Disability Insurance gives benefits to workers who become disabled and can no longer work. The program also provides for the dependents of disabled workers, and aims to replace some of the income lost because of the disability. There are rules and criteria you need to meet to be eligible for Social Security disability benefits, and you’ll need to show supporting medical evidence for your condition. “Another less known program is the childhood disability benefits, which allows individuals to receive benefits on their parent’s account so long as their disability begins before the age of 22,” says Andrew November, a disability attorney at Liner Legal in Cleveland, Ohio.

Social Security survivor’s benefits. A spouse and other family members of a worker who passed away may be eligible for Social Security survivor benefits. A widow or widower who is at least age 60 (or 50 and above if they have a disability) or a surviving divorced spouse could receive survivor benefits. This program also supports widows and widowers who are raising the deceased’s child, if that child is under age 16 or has a disability, and unmarried surviving children who are age 19 or younger and full-time elementary or secondary students or who have a disability that began before age 22. A stepchild, grandchild, step grandchild, adopted child or dependent parents could be eligible in some instances too. “Survivor benefits are one of the least understood and appreciated benefits,” says Paul Tyler, chief marketing officer at Nassau Financial Group in Hartford, Connecticut. “If your spouse passes away, you can file for survivor benefits that may be higher than your own.” If you were living with a spouse who passed away, you could also be paid a lump-sum death payment of $255.

Medicare. This government program provides health insurance for people ages 65 and older. The Centers for Medicare & Medicaid Services is in charge of the Medicare program, but the Social Security Administration handles enrollment in Medicare Parts A and B, and premiums can be withheld from your Social Security checks. If you sign up for Social Security before age 65, you may even be automatically enrolled in Medicare.

How the SSA Is Funded

Employers and workers pay into the Social Security program through a federal payroll tax called FICA, or the Federal Insurance Contributions Act. The current payroll tax rate requires both companies and employees to contribute 6.2% of wages up to a certain limit, which is $147,000 for 2022. Self-employed individuals pay 12.4% of their earnings into the Social Security program.

How to Contact the SSA

There are several ways to get in touch with the SSA if you have a question or concern about your benefits. Many routine tasks can be accomplished online at You can call 1-800-772-1213 between 8 a.m. and 7 p.m. Monday through Friday to speak to a representative. There are also automated telephone services that you can reach 24 hours a day. In addition, it’s possible to visit a local Social Security office in your area and make an appointment to speak to a representative about your situation.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

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Nearly a quarter of Americans are putting off retirement because of inflation, survey finds

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Americans say they’re putting aside their retirement dreams for the moment – at least until the price of consumer goods and inflation settle down.

The BMO Real Financial Progress Index, a quarterly survey conducted by BMO and Ipsos that measures Americans’ opinions about financial confidence, found that nearly 60% of those surveyed think that inflation has adversely impacted their personal finances. Another 25% feel that rising prices have had a “major” effect on their finances.

The survey also showed that 36% of Americans have reduced their rainy day savings, and 21% have cut back on putting money away for retirement. Younger Americans – aged 18 to 34 – are taking the biggest hit, with over 60% of respondents in that demographic saying they have had to reduce contributions to their savings in order to make ends meet.

What people are doing to offset the growing costs of living

Consumers are taking a wide range of steps to keep their financial lives from crashing down around them. Some of them include:

Changing how they shop for groceries. Forty-two percent of survey respondents are opting for cheaper items and avoiding brand names. Instead, they’re buying more store brands and limiting purchases to necessary items.

Dining out less. Forty-six percent of the respondents said they either dine out less frequently or are consciously spending less when they do go out.

Driving less. Thirty-one percent of respondents are driving only when it’s necessary to offset the soaring cost of gas.

Spending less on vacations. Twenty-three percent of consumers said they’ll be cutting back on some of the frills when they go on vacation or canceling their vacation plans altogether.

Cutting back on subscriptions. Twenty-two percent of respondents said they are ending subscriptions to their gym, streaming platforms, and other services to save money.

What financial plan experts suggest as best practices

ConsumerAffairs reached out to retirement planning experts to see what they suggest Americans do to gain some financial balance between their spending habits and rising inflation. Paul Tyler, the Chief Marketing Officer at Nassau Financial Group, said the first thing near-retirees should do is continue to work if they can.

“By continuing to work, near-retirees can continue to bring in a paycheck to cover surprise expenses and let their 401(k) balances grow a little longer,” he told ConsumerAffairs.

He added that cutting back on unnecessary expenses is also a good strategy right now.

“Analyze your credit card bills and see where you can conserve cash. Call your cable provider and request a discount. Tell your cell phone company your thinking of switching carriers and they may offer a discount. Plan errands to maximize your gas dollars.”

Another insight comes from Mark Williams, CEO at Brokers International. He says consumers should try to reduce expenses by cutting out certain “luxury” purchases, but he also notes that credit card spending is also something to keep an eye on.

“If you are noticing money is getting tighter, try not to start using your credit card more often and go into debt,” Williams told ConsumerAffairs.

His suggestions for small changes you can make to your retirement strategy that might help?

  • Reduce the amount you contribute to your retirement accounts by reducing the withdrawal percentage you are contributing to your 401K, IRA, 403B, etc…
  • Reduce the amount of auto-withdrawal (if you have one) that is going to a savings account.
  • Reduce the amount you may be saving for secondary education.
  • Consider using the equity in your home for certain expenses by using a HELOC or other type of equity loan.
  • Consider increasing your deductible(s) on certain insurance policies (homeowners, car, boat, etc…) to reduce the monthly premiums. However, consumers should note that increasing deductibles means paying more out of pocket if there is a claim. If you take this approach, Williams says you should increase your safety net emergency savings account to offset the increase.
  • Consider a review of your life insurance policies and determine if you are overinsured. If you are, you could lower the face amount of the policies to reduce cost. This should be done after speaking to a financial advisor.

“Always seek professional advice when making changes to any retirement strategy and that becomes increasingly more important the closer you are to retirement,” Williams emphasized.

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Ashley SaundersNearly a quarter of Americans are putting off retirement because of inflation, survey finds
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Are You Selling a Verb or a Noun?

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By David Macchia

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Meet a woman driven to change investment regulation and understand why it’s important that she succeeds.

Michelle Richter is a principal at Fiduciary Insurance Services, LLC, and executive director of the Institutional Retirement Income Council, Inc. She is also one of the smartest people I’ve ever met. Richter’s intellect incorporates both dimensions of “smart,” which is why she was placed in charge of a Fortune 100 company’s broker-dealer and RIA.

Richter is driven. Her “cause” is reform of regulation that levels the playing field for insurance through the introduction of a 40 Act-equivalent governing insurance advisement. I fully support this because it will result in better outcomes for investors. It will facilitate commercialization of intellectual property that, today, represents unfulfilled potential. To help the advisory profession understand the regulatory inequality that exists, Richter developed her own lexicon, using the “verbs” and “nouns” construct.

I spoke with Michelle on May 22.

I was surprised and enlightened to learn about the construct of the verbs and nouns. I didn’t know it was an issue. What brought you to the realization that we needed this?

There were a few things, but mainly, it’s because my experience is as a person who believes in creating value as an intellectual property developer, and that’s where I’ve spent my career. I’ve worked on a lot of consumer-liability-minimizing concepts, which were good concepts from good people who had good ideas. It became increasingly evident that those ideas couldn’t be commercialized.

Why is it that all these good ideas from good people cannot reach the market? I kept applying things that I had learned previously to arrive at this point, which relates to guidance that I received when I was working at a Fortune 100 insurance company, serving as both an intellectual property (IP) developer and overseer of that entity’s corporate broker-dealer and RIA. At the time, when we were developing that intellectual property, my IP counsel advised me on something that over the past few years has hit me like a ton of bricks.

It related to my IP counsel’s interpretation of the distinction between how an entity defends a trademark versus how it defends a service mark.

That’s what caused me to realize something important. At that time, 15 years ago, we had developed unique IP, and my counsel advised me that because the IP would not be embedded directly into an issuable container, that it should be service marked rather than trademarked. If you Google “trademark definition,” what you’ll see is the ability to profit from one of two things: issuance or sale. Sale means direct remuneration. If I’m selling you X, I’m getting paid for X. Inherent to the definition of trademark-ability is that you can either issue or distribute intellectual property. If you can’t profit from the product, then that product is a “noun.” If you can’t profit from the product, either by issuing it or by receiving compensation directly for it by selling it, then you have to service-mark the IP, because it is a service.

Was it a planning concept, as opposed to a product?

It was a framework for the embedding of insurance values into an asset allocation architecture, where you can value either a life insurance policy cash value, or you can translate the income value of an annuity into asset-based values. Then the value of assets, or the value of income that can be translated to assets or vice versa, is advised upon within the product. The income or accumulation value within the product can have the attributes of either fixed or variable investments, perhaps multiple asset classes within that framework. But the framework was designed to include insurance values within an asset-allocation architecture.

Would that be more like a business process?

It’s a great question. It can be monetized that way. It can also be monetized within a managed account or managed model services.

You could use the insurance values as part of the managed model values. Plenty of people, 10 years later, were doing exactly that.

When I was working at that organization, we did not permit registered representatives to sell managed accounts services because we viewed them as services, not as accounts. I was advised by my general counsel that RIAs sell “verbs,” whereas agents and brokers sell “nouns.”

With respect to managed account services, I was advised that the value for which the consumer is paying does not derive from the form of custodial account. It derives from the advising that occurs on the account.

Registered reps who are not dually authorized lack an investment adviser license that enables them to sell verbs.

Registered reps lack an investment adviser license. But RIAs, including IARs of an RIA, do.

At that time, the essence of the view communicated to me was that things like managed accounts services were verbs. Following from this logic, I believe that the 40 Act governs verb sales, appearing on the left side of the balance sheet, for two reasons. The first is very easy to explain, which is that the 40 Act is short for “investment adviser’s act.”

Investments are assets. Assets occur on the left side of the balance sheet.

But does anyone disagree with you on that?

There are people who viscerally disagree with me because they have not heard that parlance before. There are also people who feel that the point I am making is very complex, so it is understandable to only a very small audience. They would prefer that I discontinue communicating these points out of fear that I might unintentionally confuse people.

There are also people who feel like I am a nut. That’s a valid viewpoint. But I’ve not yet heard an argument that – from anyone – that says, “No. You’re misunderstanding the world.”

I don’t agree that you’re a “nut.” True passion can come across that way, however.

I concluded that the 40 Act governs verb sales by reviewing how organizations supervise it. They require things like routine, ongoing meetings with the client, because advice can only occur at the end of an advising process. Back in my day, meetings that enabled an advisor to advise had to occur at least annually. Things like that are how we can detect what’s occurring under the 40 Act. Those who have the authority to be an investment adviser are verbs. If we were to look at section 202(a)(11) within the Advisers Act, we’d observe that the words that communicate what an investment adviser does end in “ing.” Because that is the case, we can detect a verb in its present form.

The argument that what financial advisors provide is “advice” (a noun) is logically equivalent to saying that what lawyers provide is “law,” as opposed to “ legal interpreting”.

When we add an “r” to the end of a verb to refer to a person, we are describing the identity of the person who routinely performs an action (a verb). We wouldn’t call a person who once ran across the street a “runner.” We call a person a runner when they routinely run, such that part of their identity can be described by adding an “r” to the end of the verb they routinely perform.

This is another way of saying that an advisor is a person who routinely advises. Professional advising means to give advice in exchange for compensation.


The other side of the balance sheet, which is involved with liability management, is where the noun sellers live.

That’s one place where noun sellers live. Registered representatives are also noun sellers. The 40 Act made it so that there could be both noun and verb sales in financial services. I am not a historian, but as a layperson, I have heard it said that prior to the advent of the 40 Act, consumers were experiencing behavioral challenges with respect to financial professional conduct when there was only a noun-sale framework. It’s unfair to my community, those who identify with liability mitigation, that we are all seen as inexpert product shillers, like how used car salespeople are viewed.

There isn’t a verb-sale framework for liability management. The only way that we’ve seen people who have that expertise in insurance to be able to monetize their experience and their viewpoint is through noun sales. We don’t have a 40 Act for the right side of the balance sheet. We do not yet have a regulatory construct for advising on benefits or income under management. That this is messed up.

If there were a regulatory framework that allowed advisement on the insurance types of products, in a practical sense, what would they be advising on?

One good example would be the income base within a variable annuity, or for an FIA with living benefits, or for a SPIA. Any of those constructs that has a value to annuitization, or a value to an income stream that could be indicated from within the product, could support a billing base for an adviser if it were the case that we valued liability management as a verb. Something that could and would occur in the event of such a framework is the creation of inspired-by-tontining services. We do not yet broadly have tontining in the United States. We are behind the rest of the developed world in this development of non-guaranteed longevity risk mitigating products or services because we do not have the required regulatory framework. If we had the correct regulatory framework, we would already have a collective defined contribution tontining product (other than what is available from TIAA). Tontining is non-guaranteed risk-pooling for longevity benefits from which you can’t charge a large fee, because the whole premise is about efficiency. For those organizations that have invested in the noun part, which means issuing and/or distributing authority, successful products occur at the intersection of three things: novel intellectual property, issuing authority, and previous investment in distribution – a whole-saleing architecture.

When either a financial professional or an issuing organization can only profit from the noun in the sphere of liability mitigation in the way I just described, then there’s no value to intellectual property, because the issuing authority has to meet the needs of the previous investment in wholesaling. It would make no sense for an issuing organization that has made this substantial investment in distribution to create, and to promulgate, a noun that’s less profitable than is its incumbent portfolio of nouns. The efficient, low-cost asset managers, like Vanguard and Dimensional, came to exist only after there was a 40 Act, and only in the context of the RIA community. RIAs were not being paid from inside the noun. The service of advising is paid based upon the AUM or based upon notional assets that are advised upon, which is to say, upon which advisory services are delivered by a professional.

RIAs are paid for providing a service to their clients from outside the noun structure. All services are verbs.

Because my words are true, there can be no such thing in my field as valuable intellectual property. I experience offense at that.

Imagine that you had a magic wand, and a new regulatory framework appeared tomorrow for agents selling fixed-index annuities.

There would be no protection whatsoever. No financial institution to stand with them as a co-fiduciary under PTE2020-02 for qualified sales.

Let’s say that it existed. Say an agent working with a family consummated a $250,000 transaction to purchase an FIA. What would the latitude be? What would the compensation scheme look like? What would the responsibilities of advisement be in that scenario?

I believe in sentences. The insurance field has parity with the investment field, meaning that we have access to both noun and verb sales. I want to be clear about the fact that no judgment is occurring upon those of us who earn our compensation from selling nouns.

Let’s imagine it comes to be the case that insurance – liability mitigation orientation – is orchestrated around the advising premise as it differs from the product-sales premise. In this world, the placement of the FIA transaction is not the basis for the remuneration that the insurance liability adviser receives. Another way of thinking about that is what the financial planner receives. The value proposition in this case would be the fact that the adviser, the liability adviser, has worked with the client to understand what their needs are. They may recommend that indexed annuity. They may use today’s regulatory framework and get a commission from that. It could be perfectly appropriate. Alternatively, but never concurrently, as is true in the investment space, in my alternative reality, they could and should be able to charge the client on the value creation of the management of that person’s liabilities, instead of the commission that they could receive from the noun within that advising context. Either, but not both concurrently, should be valid compensation constructs available to financial and insurance professionals.

The broader scope of using that is as a strategic tool to manage a certain set of liabilities that the person or individuals have.

Right. That fits well with the premise of codifying financial planning as a discipline.

In part two of this interview, Richter addresses financial planning, the usage of annuities by RIAs, regulatory implications, and more.

Wealth2k® founder David Macchia is an entrepreneur, author, IP inventor and public speaker whose work involves improving the processes used in retirement income planning. David is the developer of the widely used The Income for Life Model®, and the recently introduced Women And Income®. David has authored many articles on the subjects of retirement income planning and financial communications. He is the author of two books, Constrained Investor®, and Lucky Retiree: How to Create and Keep Your Retirement Income with The Income for Life Model®.

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Annuities Provide Nourishment In An Income-Starved Environment

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by Susan Rupe

Just as food sustains the body throughout its lifetime, an annuity sustains a client’s savings throughout their retirement.

Just how important an income annuity is to the success of a retirement portfolio was the subject of a recent webinar by Tamiko Toland, director of retirement markets for CANNEX, and sponsored by the National Association for Fixed Annuities.

CANNEX looked at the use of annuity income incorporated into the fixed income allocation, and how that would affect the retirement portfolio sustainability. Among the findings:

» The annuity improves the sustainability of savings throughout retirement.

» Characterizing the annuity as part of the fixed income portfolio can further benefit retirement outcomes, particularly when the portfolio allocation leans more toward the fixed income side.

» The annuity can increase retirement sustainability as well as legacy.

» Equity exposure contributes to both retirement sustainability and legacy.

These findings apply to any form of guaranteed lifetime income, Toland said, whether it comes from an income annuity or guaranteed lifetime withdrawal benefit.

The research looked at whether the retiree would run out of money over the course of retirement. In addition, the research looked at legacy, or how much money would be left over when the retiree dies.

Three different asset allocations were explored in the study.

» Conservative: 30% equity/70% fixed

» Balanced: 60% equity/40% fixed

» Aggressive: 70% equity/30% fixed

The researchers added annuity income in 5% increments starting at 0% and ending at 30%. Researchers looked at a scenario in which the annuity was separate from the remainder of the portfolio and a scenario in which the annuity was included as part of the fixed income allocation.

The percentage of annuity “based on the amount of money put into the annuity on the first day of retirement,” Toland said. “And for the purpose of the study, we used single premium immediate annuities with a 2% inflation adjustment.”

The scenario considers a 65-year-old with $1 million in retirement savings who seeks a starting retirement income of $50,000. The income increases by 2% annually to account for inflation.

The SPIA income amount is based on an average of the top three rates available at the time from a SPIA with a 2% cost-of-living adjustment a company rated at least A++ from AM Best. The rate using a $100,000 premium payment was $410 a month or $4,920 a year.


In this scenario, the conservative portfolio has the highest allocation to fixed income, but it also benefits the most from adding the SPIA. Meanwhile, the SPIA reduces the financial legacy because it dedicates some starting assets to the lifetime income stream with no death benefit.

“One of the things that I think is really important is the basic principle that by shifting the annuity into the fixed income allocation, you’re able to fully allocate the rest of that portfolio into equities, as opposed to if it’s outside,” Toland said. “Then it’s almost like doubling up on the fixed income component.”


The balanced portfolio has twice the equity allocation of the conservative portfolio. As with the conservative portfolio, adding the SPIA as part of the fixed income allocation gives a noticeable improvement to the portfolio.


Although treating the annuity as part of the fixed income allocation has a noticeable improvement on both the conservative and the balanced portfolios, it has little effect on the aggressive portfolio.

Overall, the findings support the idea that it makes sense to include guaranteed annuity income as part of the fixed income allocation of a retirement portfolio, Toland said. One interesting note, she added, is that much of the effect of this approach shows up in the legacy component and not in the income sustainability component.

She said the findings consider the effect of the annuity purchase on both the strategy’s ability to provide the target income over a lifetime (retirement sustainability quotient, or RSQ) and the size of the legacy.

This is true when simply adding the annuity or counting the annuity as part of the fixed income allocation.

“What I really wanted to focus on is the idea that characterizing the annuity as part of the fixed income portfolio can further benefit outcomes, particularly when the portfolio allocation means towards more towards the fixed income side,” Toland said.

“A lot of good customers for annuities are people who are very conservative-leaning in their investments, and they don’t want to take a lot of chances. But this strategy of including the annuity as part of the fixed income allocation enables the client to be able to have a higher equity allocation. So I think that there’s a general understanding within the industry among people who really understand these products and understand the fundamental dynamics — that not having enough of an equity allocation in a retirement portfolio has its own risks and simply protecting assets alone is not the only thing to consider.

“But protecting assets does allow you to take that risk. And this study is very helpful, I think, in demonstrating how much of an effect that can have in terms of improving outcomes, particularly when clients are conservative in their investments.”

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Ashley SaundersAnnuities Provide Nourishment In An Income-Starved Environment
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Conference Speaker Offers New Way To View Retirement Assets

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By InsuranceNewsNet

BOSTON – Moshe Milevsky thinks underwriters, risk analysts, and actuaries are seriously overlooking major elements of their business that could produce savings as well as make more money.

In a fast-paced entertaining 45-minute talk in the main ballroom at the Park Plaza here, which is hosting the 2022 Retirement Industry Conference hosted by Secure Retirement Institute and the Society of Actuaries, the fintech entrepreneur and finance professor, focused on “decumulation.” Decumulation is a relatively new word to describe how to calculate strategic ways to use retirement assets while ensuring everything one has accumulated during their life lasts for as long as it’s needed, with some left over for heirs.

Milevsky’s talk, billed as “Longevity Risk Management Post Pandemic: Purpose, Products, and Strategies,” was an examination of three basic factors that insurers might want to redefine or view from new perspectives to better calculate underwriting risks and actuarial tables in a changing world:

  • Inflation
  • Aging
  • Annuities

 The True Definition of Age

“I’m going to challenge you to think carefully about what the definition of inflation and age is and how we really measure them,” he began. “And I’m going to ask you what really is an annuity.”

Milevsky relied on information from two books he’s authored, “Longevity Insurance for a Biological Age,” and the upcoming “How to Build a Modern Tontine,” to show how there is really no single inflation rate – it can vary dramatically by region, age, race, and economic standing. That information should be specifically factored when trying to determine how long a retirement nest egg will last. And he showed how both chronological age as well as biological age should be considered when designing retirement portfolios.

“Your chronological age is simply how many times you’ve circled the sun,” he said.

Biological age, on the other hand, considers factors such as telomeres, the DNA sequences at the end of one’s chromosomes, and other biomarkers that reveal a person’s true health, mortality rate, and life expectancy that may not correlate with chronological age.

“Consider the implications for this as clients – people, humans – start to become aware of this and they’re on their iPhone or Fitbit, or iWatch, and it wakes them up in the morning and tells them their biological age just went up because of something they did last night,” he said.

Everyone wants their biological age to be lower than their chronological age.

“What happens to your retirement planning and asset allocation and investment models when you have two different numbers,” he asked. “What does that mean to an investment advisor, a Social Security Adviser, and so on.”

A Centenarian Trend

Milevsky surprised the audience when he polled them on what country had the most centenarians. The majority of respondents by far chose Japan, over China, US, Indonesia, and India. The answer, however, was the US, with 92,000 chronological centenarians.

“This is a trend that’s increasing,” he said, again raising the implications on mortality rates and life expectancy. “We’re going to have more of them.”

Finally, Milevsky took the audience through the history of tontines, which date back to the 1600s. Tontines are life insurance policies shared by subscribers to a loan or common fund, the shares increasing as subscribers die – the mortality credit – until the last survivor enjoys the entire income. Milevsky said there is a budding realization that tontines could find a resurgence in the retirement asset allocation business.

“More and more asset managers are saying: ‘We get the retirement income story. We get it, we understand that we have to provide them with something,’ ” he said. “But why does it have to be guaranteed? Why can’t we just give them the mortality credits without the capital? And I think you have to keep an eye on what the investment industry is doing. Because this concept appeals to them and they want to compete in that particular space. I think they can do it.”

Essentially, he said, he believes the investment community will begin to buy up assets that appreciate from longevity improvements. “And what they’re going to tell you is we’re going to take that money, and we’re going to put it in things that do well, if indeed, longevity breakthroughs take place,” he said.

Overall, Milevsky said, it’s a good time to be in the retirement business.

“A lot of players are going to come in and say ‘yeah, maybe we can do this differently,’” he said.  “And there is going to be a big focus on managing longevity, expenditures, and uncertainty.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at

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Ashley SaundersConference Speaker Offers New Way To View Retirement Assets
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Don’t Move to Another State Just to Reduce Your Taxes

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By Jerry Golden

We know lots of friends who are considering moving from a high-tax state, such as New York, to a state with low or no state income taxes. They think they will end up with more money, although they are torn because they may also be moving away from family and friends just to escape state taxes.

What I advise them to do is think about spendable income — the amount they’ll have to spend after taxes — and not just low or zero tax rates. If you have more money to spend after paying the tax bill wherever you currently live, you might as well stay where you are, if it’s closer to the grandkids. You may be able to pay for at least one warm-weather winter trip, too.

Design a Smarter Retirement Income Plan

Before making life decisions about moving (or downsizing, purchasing insurance, etc.) retirees ought to know their number for their total starting income, and have a plan for retirement income that includes a projection of income and savings, and all planning assumptions.

The income plan ought to cover:

  • Starting income
  • Inflation protection
  • Beneficiary income protection
  • Spousal income (if applicable)
  • Plan management (when plan assumptions are not realized)
  • Market risk to plan (when markets fluctuate)
  • Legacy passed on to beneficiaries or heirs

All these subjects are covered in articles on In one article, How to Generate an Extra $20,000 a Year in Retirement, we examined the income from our favorite investor (a 70-year-old woman with $2 million of savings, of which 50% is in a rollover IRA). We saw a large before-tax income advantage from Income Allocation planning. Even if she invests a portion of that to meet her legacy objective, she still has a $20,000 advantage in spendable annual income.

The question is whether she gives back that advantage in federal and state income taxes in her home state of New York.

Reducing your Combined Federal/State Retirement Tax %

You may have heard that New York is a high-tax state, and that’s true. It ranks No. 5 on Kiplinger’s list of the 10 least tax-friendly states for middle-class families.

Importantly, most states exclude Social Security income from taxation, as well as a portion of IRA distributions and employer pension plans. Together with interest on state and local bonds that is not taxed, a retiree has a head start in reducing state income taxes.

But the question remains how much of that advantage is eaten up in New York state income taxes. The key for our Go2Income planning is that annuity payments are treated the same in both the New York and federal tax returns, meaning the tax benefits carry over. And with some of the adjustments at the state level mentioned above, the favorable tax treatment of annuity payments may be even more valuable.

Let me share with you the high-level elements of our 70-year-old investor’s federal and New York state tax filing.

A table shows a total gross income of $168,183 results in federal taxes of $20,191 and New York state taxes of $3,564.

Benefits and Cost from this Planning

For our investor the income taxed by New York would be around $67,500 — or about 40% of her total gross income. As a percentage of total income, the state income tax is a little more than 2%. Even after adding federal taxes, her Retirement Tax Rate is less than 15%. That leaves her a big advantage in spendable income. A traditional plan without annuity payments and with lower income actually pays more in total taxes — with a combined tax rate of over 18%.

So, our plan produces more cash flow from savings, much of it tax-favored, and gives our retiree the freedom to live where she prefers.

And the cost? The primary one is that annuity payments don’t continue at your passing even before the premium has been recovered.

You can elect a beneficiary protection feature that makes sure total annuity payments will equal the premium at a minimum. However, that choice will reduce the level of guaranteed annuity payments and some of the tax benefits. Or you can use the higher annuity payments to purchase some life insurance. And those planning choices aren’t the only options you will have in terms of beneficiary protection.

What if the lure of zero state income taxes is too great? Our retiree could move to Florida, save the $3,500 in New York taxes, adopt a Go2Income plan for her circumstances — and pay for the kids’ trips to visit her.

So be with the kids, live where you want and possibly leave less at your passing if it’s early in retirement. Bottom line: Don’t follow the crowd. Do your own research. And rely on resources at Kiplinger.

At Go2Income, we can provide you with a complimentary personalized plan that delivers both a high starting income and growing lifetime income, as well as long-term savings.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersDon’t Move to Another State Just to Reduce Your Taxes
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Looking to Curb Your Retirement Savings? That’s a Bad Idea

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By Brian O’Connell

Americans are doing what they can to deal with skyrocketing inflation.

According to a new survey from New York Life, U.S. adults say they’re cutting back on dining out, and are pushing back big-ticket items like vacations, buying a car, or buying a home. That’s understandable, as consumer prices are up 8.5% on a year-to-year basis through April 2022.

Americans are also curbing their emergency fund contributions, partly to keep focusing on long-term retirement savings, which haven’t hit the chopping block — yet. According to New York Life, monthly household savings contributions are falling by $243 (and $289 by millennials), yet 72% of respondents still expect to retire at their desired age.

Keep the Retirement Train Rolling

With so many Americans whittling away at the household budget, should retirement plan contributions be on the chopping block next?

No way, say investment experts.

“Lost good habits take a long time to recreate,” said Paul Tyler, chief marketing officer at Nassau Financial Group in Hartford, Conn. “It’s much better to learn how to live on less now than live with regret later.”

According to Tyler, when you stop contributing to a retirement fund, you lose a valuable money-growing tool — compound interest.

“Depending on the growth rate of your savings in the future, the compound effect – both positive and negative – can be eye-popping over a twenty-year period,” he said. “So even with the occasional downturns, putting money in a 401(k) or an annuity could prove to the best hedge yet against inflation.”

Other money managers say that retirement funding should be deemed as a major household financial priority, just like food, mortgage payments, and health insurance.

“It’s a big concern when I hear people tell me that they should cut back or reduce their retirement contributions,” said Ashley W. Folkes, director of growth at BridgeWorth Wealth Management. “I like to talk to clients about their financial priorities, very similar to a hierarchy of needs pyramid, as funding retirement is very much foundational to their futures.”

Unless you can’t put food on the table and gas in the tank to get to work, Folkes advises looking at the budget to find other ways to reduce costs.

“Cutting our back on retirement contributions may feel like the easier, softer way to reduce cost, but it can be detrimental,” he said. “It’s very similar to trying to time the market. We don’t know how long inflation will stay at these levels.”

“You’re not only missing out on putting money into a bucket to fund your future, you’re also missing out on buying funds when they are cheap,” he added.

If You Have to Cut Retirement Savings, Try This Approach

Preston P. Forman, a certified financial planner with Seasons of Advice Wealth Management in New York, said he has yet to see clients reduce retirement contributions. But if you have to cut long-term savings, take a short-term mindset.

“For most of this century inflation has been an afterthought but I expect some people will trim their 401(k) contribution,” he said. “After the pandemic, no one is in the mood to deprive themselves of anything.”

Forman advises clients to reduce, not eliminate, retirement contributions if necessary and then reevaluate in three months.

“By then often the storm has passed, and it’s a lot easier to increase a contribution from 10-to-12 percent than from 0-to-12 percent,” he said. “The funny thing is that many clients who were going to cut their contributions never get around to doing it. And that’s a good thing, ultimately.”

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersLooking to Curb Your Retirement Savings? That’s a Bad Idea
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Why Advisors Shouldn’t Dismiss Index-Linked Annuities

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Sales of protection-focused annuity products were higher in the fourth quarter of 2021 than the combined total of accumulation and income-focused annuities, according to data from the Secure Retirement Institute.

In fact, the sales of registered index-linked annuities (RILAs) have led the protection annuity charge with sales more than doubling from $4.3 billion in the second quarter of 2020 to $8.9 billion by the end of 2021.

What’s driving the appeal of protection products offered within an annuity wrapper? Why would any investor want a complex financial product that promises protection at the expense of significant upside? And why choose an annuity when similar products exist as ETFs?

In a new white paper written for the Retirement Income Institute, fellow American College Professor Wade Pfau and I take a deeper dive into a collection of financial products that offer varying loss protection and compare them to outcomes from a traditional investment portfolio.

How should advisors think about protected annuities?

First, they shouldn’t dismiss them as an inefficient gimmick. In a series of detailed articles written while he was head of retirement research at Morningstar, David Blanchett lays out the complex economics that underlie the potential benefits of financial products that use a combination of fixed income investments, equities, and financial options to create a customized distribution of outcomes.

Why might a retiree prefer an option-controlled retirement investment to a traditional long-only portfolio of stocks and bonds?

According to Nobel laureates Robert Merton and Myron Scholes, financial options can be used to construct investments that “can be used by investors to produce patterns of returns which are not reproducible by any simple strategy of combining stocks with bonds.” A retiree may prefer this altered distribution of possible returns to a conventional portfolio.

Limiting Risk

Consider a 60-year-old baby boomer who is five years away from retirement. The market has performed well over the last decade, and they have $500,000 invested today in the S&P 500 and $500,000 in bonds to fund the lifestyle they hope to lead.

The distribution of bond returns over the next five years is relatively narrow. The distribution of the overall portfolio is wider and depends primarily on five-year stock returns.

If we run a Monte Carlo analysis on the S&P 500, we can see how much their future wealth can vary by the time they retire at age 65. At the 10th percentile, they will have $410,000. At the 1st percentile, stocks will fall to $265,000. A lucky retiree at the 90th percentile will have over $1 million.

In five years, they should be able to withdraw about $22,000 from the portion of their portfolio invested in bonds (of course this is a simplification and ignores the potential risk of bonds, which can be significant as we’ve discovered recently).

If the retiree gets lucky and achieves the 90th percentile of returns, they’ll be able to withdraw $47,200 from their stocks based on the 4% rule. If they get unlucky at the 10th percentile, they’ll only be able to withdraw $16,400.

Is the retiree willing to accept the downside risk of spending $38,400 each year in order to achieve the potential upside of $69,200 if they get lucky? At lower percentiles the potential downside and upside become even more extreme (as low as $32,600 at the 1st percentile). Is this a risk the client is willing to accept?

An alternative is to give up some of the upside to cut off some (or all) of the downside risk. In a low interest rate environment, products with floors offer less upside potential and more closely resemble fixed income investments.

However, unlike the intermediate-term fixed income investments that constitute the bulk of an insurance company’s general account portfolio, products such as fixed indexed annuities (FIAs) won’t fall in value if interest rates spike.

In practical terms, the distribution of FIA outcomes in a low interest rate environment over five years ranges from 0% at the 1st percentile to 7% at the median to about 12% at the 95th percentile.

Growth is similar to expected growth on safe bonds but without the potential downside of term and credit risk. It should be noted that any attempt to position 0% floor products as “upside with no downside” is disingenuous since the upside is lower at the 95th percentile than a bond fund.

Purchasing a RILA with a -10% floor allows an investor to increase the potential upside to 19% at the 90th percentile. The upside is limited to the call options budget available to capture modest growth after the insurance company invests in bonds to guarantee returning 90% of principal.  A -10% floor allows a bigger options budget than a 0% floor.

Buffered RILAs

RILAs with a buffer allow an investor to accept a greater range of potential upside and downside outcomes. Buffered annuities are an interesting concept because they seem to be tailor-made for loss-averse investors. Why? The insurance company protects against the first 10% of losses, preventing small losses that often result in a big emotional response. However, investors are on the hook for losses beyond -10%.

For example, a -10% buffer would turn the -37% return from the S&P in 2008 into a -27% return. Big negative returns are far less common than small negative returns with a bell-shaped return distribution. Investors are completely protected against most losses and buffered against large ones.

Of course, there is a cost. The insurance company needs to employ an options strategy to provide the buffer. This will limit the upside potential of a RILA distribution. For example, at the 90th percentile a buffered annuity will have a 31% return over five years and taxable stocks will have an 87% return.

At the fifth percentile, a buffered RILA has a -8% return and stocks a -26% return. At any return below the 25th percentile, the buffered annuity provides a higher return than stocks and the difference increases toward the tail, resulting in significant downside protection.

Another Option

Another interesting protection annuity that performed well in our analyses is a variable annuity with a so-called guaranteed minimum accumulation benefit (GMAB).

The product used in our analysis offers a true five-year floor of -10%, resulting in a lower extreme downside than a buffered annuity. GMABs also provide more modest protection than RILAs against smaller downside outcomes with a -10% return at the 10th percentile and a 1% return at the 25th percentile.

The upside of a GMAB, however, was far higher than a buffered annuity with a 53% return at the 90th percentile and a 66% return at the 95th percentile.

For an investor who wants to get rid of any possibility that they will have to cut back significantly on spending if they get unlucky with their stock investments over the next five years while giving up only the more extreme upside outcomes if they get unlucky might find the GMAB product more attractive than an unprotected stock investment.

Deferring Gains

An additional advantage of holding nonqualified assets in products that use financial options to tailor an investment portfolio in an annuity wrapper is the ability to defer short-term gains until after a worker has retired.

This is particularly valuable when a worker is in a significantly lower tax bracket after retirement. Of course, gains could be further deferred if the annuity is turned into lifetime income using an immediate annuity that benefits from the exclusion ratio where only a portion of each payment is subject to income taxes.

The insurance companies who manage these products provide value by managing option trading on behalf of the advisor and providing guarantees that insulate a client from volatility swings that could increase option prices.

Option-protected portfolio strategies aren’t new, but the outcomes they produce appear to be increasingly popular among investors nearing retirement.

This shouldn’t be surprising since many retirees base their decisions about when to retire on the lifestyle they can generate from the investments they hold today. A negative return shock can result in a delayed retirement, or an unacceptable drop in lifestyle that could have been eliminated by cutting off some upside.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersWhy Advisors Shouldn’t Dismiss Index-Linked Annuities
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Reverse Mortgages and Estate Planning

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Your home may be your most valuable asset and represent the largest portion of your estate. A reverse mortgage can help you hang onto that asset, by letting you tap into your accumulated home equity without having to sell the home. Still, the money you receive from the reverse mortgage will also have to be repaid after you die, reducing the value of your estate, possibly substantially. Here is what you need to know about reverse mortgages and estate planning.


  • If you have a reverse mortgage on your home, it will have to be paid off after you die, reducing the home’s value to your heirs.
  • The rules are different for spouses who inherit homes with reverse mortgages than for other heirs.
  • A reverse mortgage could allow you to supplement your retirement income without drawing down other assets in your estate.

What Happens to Your Reverse Mortgage After You Die?

When you leave a home with a reverse mortgage to someone, you’re also leaving them with responsibility for the mortgage. What they’ll need to do next depends on their relationship to you.

If Your Heir Is Your Spouse

Spouses who inherit a home with a reverse mortgage fall into three groups. Which group your spouse is in will determine whether they have a right to stay in the home and possibly continue to receive benefits from the reverse mortgage.

  • Co-borrowing spouse – A co-borrowing spouse is listed as such on the original loan documents. Any co-borrower (they don’t have to be your spouse) can stay in the home and continue to receive money from the reverse mortgage.
  • Eligible non-borrowing spouse – Spouses who didn’t qualify to be co-borrowers (typically because they were under age 62 when the loan was issued) can be listed on the mortgage as eligible non-borrowing spouses. If they meet certain other requirements, they can also remain in the home, but they won’t receive additional money from the reverse mortgage.
  • Ineligible non-borrowing spouse – Such spouses don’t meet the requirements for one of the first two categories. They must buy the home themselves if they wish to remain in it. They can also sell it.1

In the case of co-borrowing or eligible non-borrowing spouses, the home and reverse mortgage become part of their estate when they die.

(Please note that this article describes the rules for Federal Housing Administration (FHA)–insured home equity conversion mortgages (HECMs) originated on or after Aug. 4, 2014; older HECMs have somewhat different rules. The Consumer Financial Protection Bureau provides both sets of rules on its website.)2

If Your Heir Is Someone Other Than Your Spouse

If you leave your home to your children or other heirs who are not your spouse, they will not be eligible to keep the reverse mortgage; instead, they must pay it off within a specified time frame. Essentially, they will have three choices:

  • Sell the home –After they pay off the mortgage, anyequity that remains is theirs to keep.
  • Buy the home –They can also pay off the reverse mortgage with their own funds if they want to keep the home.
  • Deed the home over to the lender – This way of settling the debt is known as a “deed in lieu of foreclosure.”3

Fortunately, no matter how much you owe on a HECM, your heirs won’t be stuck with a net debt. The most they’re obligated to pay is either the full loan balance or 95% of the home’s appraised value, whichever is less. The FHA insurance will cover any difference.4

Your heirs may have to take action fairly quickly. Technically, they have only 30 days from receiving a due and payable notice from the lender, although they can ask for an extension of up to a year to give them time to sell the home or arrange for financing to buy it themselves.5 Which course they are likely to follow will depend on a variety of factors, including how attached they are to the home and how much debt it carries.

One suggestion you may see online is to use some of the proceeds of the reverse mortgage to buy a life insurance policy made payable to your heirs. This could provide them with sufficient cash to purchase the home after your death. However, you may need all the money you receive from the reverse mortgage to cover your living expenses and not have any left over to buy life insurance, which can also be costly in your later years. Still, this could be an option for some people.

If You Have Other Assets

Reverse mortgages may be of greatest appeal to people who lack retirement accounts, nonretirement investment accounts, or adequate cash savings, making their home their only significant financial asset.

For example, if you know your heirs would like to inherit your home, drawing on those other assets for income could make more sense than running up a large balance on a reverse mortgage. On the other hand, if your heirs don’t have any particular attachment to the home, borrowing against it can be a way to preserve your other assets for them.

Wade Pfau, author of Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,notes that having a reverse mortgage to draw on is one way to protect your other assets in a bear market. Rather than being forced to sell investments when prices are down to supplement your income, you can tap the reverse mortgage for income until prices rise again.6 Of course, you’ll pay a price for that flexibility in terms of the reverse mortgage’s steep up-front costs.7

A reverse mortgage might also help protect your other assets if you ever face major long-term care costs. Bear in mind, though, that the mortgage will have to be repaid if you move out of the home and into a care facility for 12 consecutive months or more, unless you have a co-borrowing or an eligible non-borrowing spouse living in it.8

How Much Can You Borrow With a Reverse Mortgage?

How much you can borrow with a reverse mortgage depends on your age (or the age of your co-borrowing or eligible non-borrowing spouse, if they’re younger than you), the equity you have in your home, and current interest rates. The current maximum for a government-insured HECM is $970,800.7

Where Can You Get a Reverse Mortgage?

To get a HECM (the most common type of reverse mortgage), you must go through a lender approved by the FHA. There is a search tool for locating lenders on the website of the FHA’s parent organization, the U.S. Department of Housing and Urban Development (HUD).9

At What Age Do Most People Get Reverse Mortgages?

While you’re eligible for a reverse mortgage at age 62, most people who get one wait until later. A Consumer Financial Protection Bureau study found that in 2019, the latest year for which data is available, the median age of reverse mortgage borrowers was 73.10

The Bottom Line

Your home may represent a significant part of your estate and having a reverse mortgage on it will affect how much of its value your heirs will receive when you die. If you have financial assets in addition to your home, supplementing your income with a reverse mortgage can help you preserve them for your estate. Because your heirs will generally be responsible for paying off the loan when you die, it’s worth discussing the situation with them well in advance.

Today’s Refinance Rates Are Better Than Ever

$400,000 for 1.93% APR for a 15-year fixed mortgage. These low rates won’t last forever. Experts agree rates will likely rise 30% over the course of this year. Skip this month’s payment if you refinance today. Calculate your new payment and see how much you could save with LendingTree.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersReverse Mortgages and Estate Planning
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Retirement Planning Is No Laughing Matter: WealthConductor CEO

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By Jane Wollman Rusoff

Approaching the challenge of retirement income planning in a lighthearted fashion may have friendliness written all over it, but it’s unlikely to be an effective strategy, argues Sheryl O’Connor, co-founder and CEO of the technology firm WealthConductor, in an interview with ThinkAdvisor.

“Retirement income planning is a deadly serious topic,” she says. “It’s scary.”

Engaging people through “games or funny videos” is “really insulting” — “and it isn’t going to help people save more,” she maintains.

What pre-retirees want, surveys show, is a written customized plan that gives them confidence they’ll conquer their “two top concerns” in retirement: the cost of health care and outliving their money, according to O’Connor, winner of two 2021 ThinkAdvisor LUMINARIES awards in Executive Leadership.

Advisors who specialize in the retirement planning distribution stage “are going to be the ones benefiting from the largest migration of assets from the accumulation phase to the distribution phase in the history of financial services,” O’Connor says in the interview.

“This represents the biggest opportunity that advisors have seen in at least 30 years,” she notes.

WealthConductor’s prime offering is its platform IncomeConductor, which supports advisors with an income distribution strategy customized to a client’s needs and goals.

Further, it helps advisors position themselves as specialists in retirement income distribution.

The online software is available to them on a subscription basis.

IncomeConductor pivots on the strategy of “time-segmented milestones,” devised by O’Connor’s partner Philip Lubinski, a veteran certified financial planner who developed the strategy of bucketing assets, she says.

The firm’s third co-founder is Tom O’Connor, chief marketing officer.

Because client and advisor collaborate on building the IncomeConductor plan, clients “are more likely to adhere to it,” Sheryl O’Connor says.

Before launching Hartford, Connecticut-based WealthConductor in 2017, she co-founded 3D Asset Management, an RIA where she built a turnkey asset management program designed to let advisors completely outsource their back-office administration.

Earlier — from 1998 to 2004 — she was with The Hartford and MassMutual.

In the interview, she describes IncomeConductor’s distinctive features and benefits — including sending alerts to advisors that “there are opportunities to take some risk off the table” — and how it differs from other bucket strategies.

A former schoolteacher, O’Connor is taking the industry to task for not “evolving correctly.”

“It is sticking with the old way of doing things. But we have to move forward and realize that retirement is different today,” she says.

“We can’t keep using the tools and strategies that we used for our parents’ generation for [today’s] generation,” she stresses.

Speaking by phone from South Windsor, Connecticut, O’Connor says: “There’s a lot of talk in the industry about financial wellness, financial education and client engagement. Those are great goals.

“But I don’t see anybody doing them really effectively,” she says.

Here are highlights of our conversation:

THINKADVISOR: What aspect of retirement planning is most critical for advisors to focus on today?

SHERYL O’CONNOR: Because of the huge wave of baby boomers going from a working career into retirement, we’re experiencing the largest migration of assets from the accumulation phase to the distribution phase in the history of financial services.

Therefore, people are looking for advisors to provide retirement income planning services.

This presents the biggest opportunity that advisors have seen in at least 30 years.

Advisors that specialize in this area are going to be the ones benefiting from the big change of assets from accumulation to distribution.

How can they approach this in the most effective way?

Retirement income planning is a deadly serious topic: People are starting a whole new phase of their lives full of unknowns. It’s scary. So the best way to engage them isn’t through games or funny videos. That’s really insulting.

Gamification isn’t going to sustain somebody’s interest and get across what they should do. It isn’t going to help people save more.

Why is being assured of a secure retirement so challenging?

Today’s retirees have to rely almost solely on Social Security benefits and what they’ve managed to save in a 401(k) plan or an outside account, or maybe an investment in property.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersRetirement Planning Is No Laughing Matter: WealthConductor CEO
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