Displaying items by tag: retirement

(New York)

Variable annuities can be a fantastic product for long-term income security. However, they are complex products and buyers need to make sure they understand what they are buying. In particular, here are a few key points to remember when purchasing. Firstly, providers often have unique policies for how benefits are paid out once one spouse dies, so make sure these are understood to avoid accidentally disinheriting someone. Secondly, make sure clients understand the differences between the different value measurements of a variable annuity, such as cash-out value, death benefit, or “annuitized” value, as these can potentially cause some shocks. Finally, be careful when exchanging an older annuity for a new one, as older versions can be significantly more generous and are worth holding onto.

FINSUM: Variable annuities can be great long-term income streams, but it is integral to understand exactly what one is buying.

(New York)

Here is an eye-opening stat for anyone working in wealth management: 37% of all advisors expect to retire in the next decade. That will put about 39% of all AUM in the industry in motion. The biggest surge in retirement will be on the B-D side of the fence. The major question is who will replace all these advisors? “While some progress is being made, the industry is struggling to recruit and retain advisor talent that is adequately prepared to inherit the businesses … In an effort to overcome this challenge, firms are boosting recruiting efforts to bring new advisors into the industry and revamping training efforts to improve success rates”, says Cerulli Associates.

FINSUM: Succession panning has not been very good in general, so there are big questions about how this will play out. This is either one of the best opportunities in the history of the business, or the whole market might shrink naturally if older advisors retire and Millennials don’t hire new ones.

(New York)

Retirement takes a lot of planning, which every financial advisor knows intimately. Yet, retirees themselves often forget some of the big things that can derail their financial plans. Accordingly, here is a list of several important high expense items that retirees forget to account for. Firstly, one-time big ticket things, like new furnaces, air conditioning units, repainting the house etc. This big expenses can catch retirees off-guard. Relatives in need are often another big commitment that retirees don’t see coming. Additionally, many don’t realize that as their Social Security distributions rise, they can be moved into a higher tax bracket and may also see their Medicare premiums rise.

FINSUM: This is a just a good reminder piece of some of the pitfalls of retirement.

(New York)

There are a lot of retirees, or near retirees, who have not had to navigate real market volatility for around a decade. And as any retiree knows, high volatility in or at retirement is a very scary prospect. However, there are ways to navigate it. Some tips including keeping a cash buffer, going bargain hunting in the market to find undervalued stocks, and re-evaluating stock exposure. Rotating into sectors that do well in downturns, like consumer staples, healthcare etc, can also be smart.

FINSUM: This is good advice. That said, the US may not be headed into a really bad economic and market scenario, so it may not be wise to get too defensive.

(New York)

Retirement income is such an important aspect of a financial advisor’s job, that one could reasonably argue it is the main duty of the profession. With that in mind, here are a couple ways to create lasting retirement income for clients. The first tip is simple, and every advisor should know it—delay claiming Social Security until 70, which significantly boosts annual income. Social Security is uniquely built to help protect against many of the risks of retirement, with one specialist saying “It’s indexed for inflation, it protects against longevity risk, and if the stock market crashes, it doesn’t go down”. The second part of this two-part strategy is to invest like one is still young. Since once is more hedged by greater Social Security income, one can afford to be more aggressive in markets.

FINSUM: This is a good basic strategy, though it requires working longer and a good degree of self-control.