Nearly 45 percent of working-age households are currently at risk of seeing their standard of living fall by at least 10 percent in retirement. The good news is that even modest changes — like working two extra years or saving
3 percent more — can substantially improve your client's retirement security.1
The age for collecting Social Security is rising, traditional pensions are disappearing, savings rates are anemic, and people are living longer. According to the new "Retirements at Risk" study by the Center of Retirement Research (CRR) at Boston College, these are some of the key reasons 43 percent of working-age households are currently at risk of seeing their standard of living fall by at least 10 percent in retirement.2
The fact that many Americans under the age of 60 aren't taking such forecasts seriously reflects in large part the experiences of their parents and grandparents who appear to be getting along just fine in retirement.
"We're in something of a Golden Age for retirees," said Dr. Alicia Munnell, director of the CRR and co-author of the study. "A lot of them still have traditional pensions; a lot of them just enjoyed a wonderful run-up in housing prices. So it's hard to focus people's attention on trouble ahead when (retirees) seem to be doing fine right now."3
Not only is retirement going to get tougher over time, Dr. Munnell says the younger you are the greater the financial risk. The good news is even modest changes in your client's behavior can result in big improvements. Here are three simple retirement strategies that can help.
One: Save More
One of the simplest solutions is to simply save more. According to the CRR study, Generation Xers who save an additional 3 percent of each paycheck reduce their retirement risk by 11 percentage points.4
Two: Delay Retirement
By working to age 67 — and not drawing income from Social Security or retirement plans — most people would have a secure retirement. In fact, the study found that by delaying retirement just two years, from 65 to 67, Americans could reduce their financial risk by 11 percentage points.4
In addition to giving their nest eggs more time to grow, delaying retirement allows your clients to collect 100 percent of their Social Security benefits. In its study, CRR conservatively assumed that people will retire at age 65, although in reality almost half of all Americans begin collecting Social Security at age 62.5
Unfortunately, clients who retire at 62 face a permanent benefits reduction of 25 percent (30 percent for those born in 1960 or later).6 Conversely, for every year they delay collecting benefits past age 66 they increase their benefits by an additional 8 percent (through age 69).7
One way many pre-retirees stretch their work life is by creatively "retiring" to a new career, becoming consultants, or going into business for themselves. They might even join the Peace Corps for a few years.
You can help these types of clients put their retirement temporarily on hold by shifting retirement assets held in a company plan into the SymetraSM Custom Annuity. With Custom, clients can select an interest-rate lock period of one, three or five years. At any time after the first year, clients can convert the assets into a stream of income they can't outlive.
Jess Murphy, a Certified Financial PlannerTM and president of Murphy Financial Advisors in Guymon, Okla., says he's a big fan of the product: "Custom allows us to create unique retirement solutions. We haven't found anything like it anywhere else, which is why we use it a lot."
Three: Have an Income Plan
As you know, engineering a successful retirement doesn't end the day your client's retirement begins. Income annuities can play an important role in helping your client's retirement dollars last a lifetime. Plus, they can be customized to fit almost every possible retirement scenario.
For example, your client might be interested in a "split annuity" solution. To keep it simple, let's say our hypothetical 65-year-old client has Social Security, a small pension and $100,000 set aside for supplemental retirement income. She puts $50,000 into the Income Builder single premium income annuity and invests the other $50,000 in an equity portfolio.
Income Builder is a 10-year period certain annuity, which helps offset the effects of inflation by giving your clients a "pay raise" in the sixth year. In this scenario, our client would receive $461 a month during the first five years and $534 per month in the second five years (get an instant online quote with Symetra Express).8 While your client is collecting these monthly payments, her other $50,000 is growing.
Through the rule of 72, we know that if our client earned a hypothetical 7.2 percent on her equity investments, at the end of 10 years her $50,000 will have doubled.9 In other words, by the time her annuity payments end she would still have $100,000.
"Many advisors typically offer a SPIA and deferred annuity that would grow for five years and then be annuitized for the 10-year income need outlined in our hypothetical scenario," said Branden McAllister, assistant vice president and national sales manager for Symetra. "In our split annuity solution, Income Builder guarantees the income stream versus shooting for a target. At the end of the sale, the client gets peace of mind and the advisor earns a nice commission."
Compensation for our Income Builder product is 4.25 percent.
The Moral of the Story
Remember what Charles Dickens' Ebenezer Scrooge asked the Ghost of Christmas Yet to Come after he was shown his grim future?: "Men's courses will foreshadow certain ends, to which, if persevered in, they must lead. But if the courses be departed from, the ends will change. Say it is thus with what you show me!"
The answer for your clients is, "Yes, you can change the course of your financial future!" Like Ebenezer, your at-risk clients have the power to take simple steps that result in dramatic improvements in their financial outlook. And who doesn't like a happy ending?
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| For more ideas on how to help your clients turn things around, contact our Sales Center at invest@symetra.com or 1-800-706-0700.
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