Jack Marrion discusses why clients should look at annuities to provide retirement income have you done the same for your clients?

Transcription

1 Jack Marrion discusses why clients should look at annuities to provide retirement income have you done the same for your clients? Harry Stout: Welcome to Insurance Insights, sponsored by Creative Marketing. Since 1984, Creative Marketing has focused on helping agents reach their goals and grow their business. I'm your host, Harry Stout. During July of 2011, the U.S. government accountability officer, GAO, issued a 79-page report entitled Retirement Income: Ensuring Income Throughout Retirement Requires Difficult Choices. The report has been held by industry leaders and the financial press as an objective, non-industry produced source that makes it clear that annuities represent opportunity for lifetime retirement income that supplements public and private pension income. Overall, the report is a document that advisors should read and reference with their clients. You can get a copy at the GAO web site, or at Recent advisor surveys have shown that just over 50 percent of independent insurance agents recommend and sell annuity products. To discuss the GAO report and why advisors are not using annuity products more, our guest today is Jack Marion. A decade ago, Best Review said Jack Marion was likely to affect the course of the industry, and he has. Jack is president of Advantage Compendium, providing research and consulting services to select financial companies. He has twice been asked to address the National Association of Insurance Commissioners on annuity issues. His insights on the annuity and retirement income world have appeared in hundreds of publications, including Business Week, Kiplinger, and the Wall Street Journal, and his research is frequently referenced by regulators. Welcome, Jack. Jack Marion: Thanks, Harry. Harry Stout: Jack, the GAO report looks to be an objective, well written document that supports the use of annuities in retirement income planning. What are the report's key messages to consumers and advisors?

2 Jack Marion: I think the biggest key message is the fact that it mentions annuities. For the history of the financial world, the standard answer has been build up a portfolio of assets, and then withdraw from those assets, and the main reason for that is Wall Street is not a place of annuities. Well, what the GAO report has done is they've looked at the whole field, the broad field, and gone beyond Wall Street and said, you know, annuities are an important part of the annuity puzzle. They've gone even so far as to suggest that retirement plan sponsors should be encouraged to offer annuities to their plan participants. Harry Stout: Jack, that was a great answer. As we look at the report, what does it say about how retirees should plan the income they need in retirement? Jack Marion: Well, a big part of it depends largely on the retiree's income and assets, because a key point of the whole report is that people should delay, uh, collecting Social Security for as long as possible, preferably until full retirement age, which is not what people do. Roughly three quarters of people start taking Social Security benefits early, and that can really hurt them. For example, if you've got somebody that was supposed to get $16, at age 66, which is the full retirement age for the next, uh, eight years, and they start taking money out at 62, they're gonna get $12, a year. It's nice that they're getting the money initially, but if you keep going further and further into the future and look at, say, what you're getting at age 75, the person that started collecting early is only getting 17 grand; the person that waited until age 66 is getting 21 grand, and the difference keeps expanding, so you want to stall as long as you can. If you don't have the assets, what the GAO says is keep working. Slug it out in the trenches. But if you have the assets, what the GAO says is buy an annuity. Harry Stout: Jack, does the report promote the use of any specific type of annuity product? Jack Marion: It talks more about immediate annuities, because those are the annuities that provide an immediate income that lasts as long as you, you live, with a traditional annuity; but it also talks about deferred annuities to get to the point where you need that income, and it mentions using incomes with guaranteed lifetime withdrawal benefits, uh, both variable annuities and fixed rate annuities and index annuities, all of the annuities that are designed to provide that income if you cannot live. So it's a very generic report in that it doesn't highlight any specific product type. It just says annuities are good; pick the one that fits your need. Harry Stout: Jack, are consumers or advisors discouraged from using any particular product types? Jack Marion: No, that's one of the great things about this report. It, it doesn't, it's not pro-wall Street; it's not pro-annuity; it's, it's not pro-social Security. It says use the right product for what the need, uh, requires, and, in that respect, it's a very fair and balanced report, as to the product, uh, required. Do your research; find out what you need.

3 Harry Stout: It seems overall that the report just gives the pluses and minuses of various types of solutions, and that's great for people reading it. It's a great reference, uh, work as a result. Jack Marion: I couldn't agree more. Harry Stout: This is a great discussion. Let's take a short break, and when we return, we will have more questions our listeners should enjoy. Break#1: This podcast has just introduced you to an opportunity for providing your clients with supplemental lifetime retirement income. Wouldn't it be great to know that when it's your turn to retire, you can count on a similar resource? Creative Marketing is proud to introduce the first IMO-provided deferred compensation plan for agents and advisors, and deferred comp is just 1 of 5 ways you can get paid when you partner with Creative. Call , or visit for details. Harry Stout: Welcome back. We are talking with Jack Marion about the 2011 GAO report, its key messages and recommendations. Jack, what does the report say about the growing challenge of outliving assets? Jack Marion: Well, there's a fundamental risk. I mean, if you, if you have a couple, there's a 1 in 4 chance that at least half of that couple is gonna make it past the age 95, so the money has to stay around for 30, 35 maybe years or even longer. When you look at traditional methods of producing income for retirement such as a portfolio, stocks and bonds, that often does do it, but there's a risk that if we'll run out of money before you die, and if you're taking out 5 percent a year, for example, there's about a 3 out of 4 shot that the money will be there, based on history, but there's a 1 in 4 shot it won't. So that's always a concern. And the other part about outliving your assets is it really depends upon when you're retired. Uh, some numbers I ran: **** if you retired in January 2000 or January 2001 and withdraw 5 percent, as of today, your portfolio would require double-digit returns every year until you die Harry Stout: Wow. Jack Marion: just to make the money last until age 95. Harry Stout: Wow. Major, major difference. Jack Marion: So that's, that is the concern, and the nice thing about an annuity, whether it's a lifetime withdrawal benefit or an immediate life annuity is it makes the money last as long as you live. Harry Stout: It's the power of the guarantee, and the guarantees are in the products. Jack, given the risks that we've talked about today and the guarantees that are in, uh, annuity products, why aren't more insurance professionals using today's annuity products to meet the growing retirement income challenge Americans face?

4 Jack Marion: Based on a lot of research and a lot of, of face time last year, with producers and, and professionals, many of them are still selling rate. They're not focusing on what the annuity is designed to do, which is to take care of a problem better than any other solution can take care of the problem. I mean, they're not concentrating on the fact that these immediate annuities, the select and withdrawal benefits, these deferred annuities that can be converted, all solve the need of not having your money run out before you do. And they need to switch back and think about selling the solution of income, and not selling rate. Harry Stout: And, you know, Jack, all of us have worked probably the last 20 to 30 years of our career, some of us old-timers, focused so much on accumulation. Now the change has to be made to focus on that payout and that lifetime income. Jack Marion: Absolutely. What we need to concentrate now on are income based solutions, not asset based solutions, because the way that consumers really think about retirement is they have their money divided into little buckets, and they say that this asset will cover this expense and that asset will cover this expense, this other expense, and what they're using the, the immediate annuity for or the lifetime withdrawal benefit for is to cover essential expenses, and if you concentrate on the income, what you're really doing is focusing on the way that consumers really make decisions about their retirement. Harry Stout: Jack, where do you think financial professionals should go to get the best information and education they need to understand the new annuity offerings that are out there, the income features and benefits that are in those contracts, and the companies that produce the products? Where do you think they should go? Jack Marion: Well, it's such a rapidly changing field. There's new products coming out, there's innovations coming out, and this is happening on an ongoing basis. It's drive a producer nuts to try to keep track of it all themselves, so you go to the professionals. You go to the independent marketing organizations, the annuity organizations. That's their job. They track what's on the market. They track what's selling well. They track what's solving problems well, and then they provide the training and the education to help the producer and the annuity professional market the product and solve the problems. Harry Stout: Jack, I want to thank you for being with us today. Your thoughts and comments will help producers better work with consumers, as they consider the benefits annuity products have to offer to meet America's retirement income challenge. Jack Marion: It was great to be here.

5 Harry Stout: Thanks, Jack. Insurance Insights is distributed nationally to inform and educate producers on new trends, products, and consumer needs. Our hope is that the information presented will enable you to be a better financial professional. We'd like to thank our sponsor, Creative Marketing, for their support. If you have an idea for a future topic, please send them to me at harry.stout@insuranceinsights.com. Again, that's harry.stout@insuranceinsights.com. Thanks for listening. Break#2: You've just heard about a smarter way to help clients meet the retirement challenge. But don't stop there. Be sure you're considering your own financial future. By partnering with Creative Marketing, you can take advantage of the producers' maximum compensation plan, offering five ways to get paid on your premium, featuring the first ever IMO-provided deferred comp plan available at zero cost to agents. You don't just get paid now; you also get paid later. It's that simple. For specifics and ways to get started, call , or visit