RETIREMENT INCOME SECURITY PLANNING

Transcription

1 RETIREMENT INCOME SECURITY PLANNING Maximizing Your Impact Presented by Joseph W. Brezden CLU, ChFC, CFBS, CRPC Brezden Wealth Advisors For education and training purposes. Not for use with the public. CRN Lincoln National Corporation

2 INTRODUCTION Agenda for today Retirement Planning Process If you don t have a process, you have a problem Core Issues Recurring themes Cycle of Operations Meeting by meeting template Case studies How we plan for them How to position yourself as advisor of choice for retirement planning Takeaways for you the advisor For agent or broker use only. Not for use with the public. 2

3 WHY RETIREMENT PLANNING? Studies show Clients have multiple advisors during accumulation phase Clients want one advisor during their retirement phase Coordination of all retirement issues under one roof We as advisors are uniquely competitive in the Retirement planning arena due to our cross disciplinary approach This is a key differentiator for us as advisors Numerous opportunities for implementation Natural trigger for money in motion 3

4 SAMPLE CASES Case Study #1 Case Study #2 Case Study #3 Case Study #4 Case Study #5 Fee $3,750 $3,500 $3,500 $5,500 $3,500 Investments (Assetmark, Premier, Brokerage, REITs, Oil & Gas) $21,000 $13,500 $6,250 $30,700 $14,500 Life N/A N/A N/A N/A $7,500 LTC $18,000 $28,600 $3,700 N/A $3,400 Annuity $46,000 N/A $12,000 18,750 N/A Total First Year GDC $88,750 $ 45,600 $ 25,450 $54,950 $28,900 4

5 PERSONAL BACKGROUND Career History Came into business as Life Insurance producer 19 years with Mass Mutual Life and Qualifying Member of the Million Dollar Round Table (MDRT) before the age of 30 Wrote 90 to 100 lives on average each year for the first 10 years in the business 15 years with Sagemark Consulting/ Lincoln Financial Advisors Transitioned to do comprehensive financial planning Intellectual property Process Practice has naturally evolved into Retirement Planning 5

6 PRACTICE STRUCTURE Brezden Wealth Advisors Launched in 2013 Michael Brezden, CFA Junior Planner Gen 2 Program Sandy Poznoski Admin/Practice Manager Assistant for 27 years For agent or broker use only. Not for use with the public. 6

7 TRANSITION TO RETIREMENT INCOME ILLUSTRATOR SOFTWARE Have used Financial Condition Model historically for retirement income plans Transitioned to Retirement Income Illustrator in 2016 Visual Interactive What If scenarios Monte Carlo Simulations/Probability of success in real time Model LTC claims in real time Model Survivor Income needs in real time Model Annuity options/benefits in real time Model various investment outcomes (below, average, above) For agent or broker use only. Not for use with the public. 7

8 CYCLE OF OPERATIONS 8

9 MARKETING Target Markets Business Owners Pre-Retirees Executives Two ways to prospect Hunting Personal introductions Referrals Personal observation Trapping Center of Influence (COI) meetings Networking Groups Newsletter Client Events 9

10 IDEAL CLIENT PROFILE 10

11 INTRODUCTIONS 11

12 INTRODUCTIONS 12

13 APPROACH TALK Approach Talk Preamble Data Gathering Bridges to Disturb Next Appointment Close for Contract Engagement Proposal Preliminary FCM/RII with their information Open binder Give client a peek Close and pull away Sends a subtle message that client has to hire us to get it Range of fees $3,500 - $12,500 13

14 APPROACH TALK Retirement Planning Bridges Financial Independence Efficient Frontier Volatility Long Term Care Survivor Income Social Security Outright Distributions Drill & Rehearse Monday morning Drill & Rehearse D & R Partner Time block on calendar Lincoln meetings PEAK Fall Focus TRG 14

15 CLIENT CONCERNS Concerns How much can I spend per month? Will I outlive my income? How do I pay for nursing home expenses if needed? I m afraid of the stock market and losing money. When should I turn on my Social Security income? Where s my medical insurance going to come from when I retire and how much does it cost? Will my spouse be ok if I die? When I leave my employer/job/business, what do I do with my 401k/qualified plan account? How do I elect to take my pension income? When do I need to take RMD s and how much do I need to take? How do I avoid penalties? How do I know my investments are correct for me? How can my income keep up with inflation? In a nutshell, client wants to know one thing, How is this all going to work? 15

16 CORE RETIREMENT PLANNING ISSUES Cash Flow Budget Accumulation vs. Distribution Social Security Medicare Long Term Care Management of Qualified Plan Assets Survivor Planning 16

17 CLIENT CASH FLOW CONCERNS Clients have questions I understand my fixed monthly expenses but I have some expenses that are not fixed every month, they fluctuate. How does that fit in? I want to provide a 529 plan for my grandkids, but how does that affect my monthly expenses? I want to buy a 2nd home or RV for retirement use, how does that fit in? We would like to leave something for our kids, but we re not sure if we can afford to. The planning pyramid clarifies for the client how these various expenses are prioritized and sequenced. It begins to formulate where those monies are going to come from. It also introduces the concept of predictable, recurring monthly income. 17

18 RETIREMENT INCOME MATRIX 18

19 BUDGET FORM Budget Form Simplest concept but profound implications The process starts with the budget Most clients do not have one when they walk through the door If we make a recommendation to a client, how can we have conviction if we do not know their cash flows? Actual client comment: 19

20 ACCUMULATION VS. DISTRIBUTION Up until Retirement, the focus is accumulation The sequence of returns may have less of an impact on the portfolio of a longterm investor who is accumulating assets for retirement. At Retirement, the focus changes to distribution However, during retirement, the interplay between an investor s rate of withdrawal and the sequence of returns can have a dramatic impact on a portfolio s overall ability to last. Proper preparation in planning is necessary to avoid over dependence on future income streams that cannot be controlled as to amount, timing, or reliability Ties back to simple mathematics, for example Withdrawal rate is X If portfolio falls by 50%, withdrawal rate is 2X (doubled) This makes recovering from the 50% decrease statistically improbable during the distribution phase Evaluate the feasibility of utilizing an annuity to provide guaranteed future streams of income that you cannot outlive regardless of market performance 20

21 ACCUMULATION VS. DISTRIBUTION CONT. 21

22 SOCIAL SECURITY Social Security decision Opportunity to demonstrate value to the client Analyze all of their filing options Additional retirement income for the client as a result of your analysis (potentially $100,000+ of additional income over their lifetime) No product sale is involved Helps solidify the relationship with the client Consider strategies designed to maximize income at age 70 and beyond, providing an element of longevity insurance Must confirm the client has financial means to wait until age 70 Take into consideration marital status, age and health Consider filing while still working in the event of long term care insurance needs For example, $30,000 a year of SS income could fund a 3-pay MoneyGuard policy between ages 67 and 70, while still working. (consider income taxes) Tools we use Social Security report developed by the Planning Department 22

23 SOCIAL SECURITY CONT. 23

24 SOCIAL SECURITY CONT. 24

25 SOCIAL SECURITY CONT. 25

26 SOCIAL SECURITY CONT. 26

27 MEDICARE Medicare decision Opportunity to demonstrate value to client Client is being bombarded with mailings from Insurance companies to enroll in their Medicare programs Analyze their various options for coverage There are two options for Medicare Original Medicare (A, B, D, Medigap /supplement) Medicare Advantage C Reference next chart Consideration should be given to investment vehicles that defer income (annuities, permanent life insurance) as a means to reduce taxable income, potentially managing down the income-related adjustment component of Medicare premiums Reference chart after next 27

28 MEDICARE CONT. 28

29 MEDICARE CONT. Medicare Costs The cost of Parts B & D may be based on your level of income up to two years prior to enrolling in Medicare 29

30 LONG TERM CARE Long Term Care decision You can have a very robust retirement income plan but a potential incoming bomb that could blow up your entire plan is a Long Term Care event Disturbing statistics we include in our Discussion Outlines At least 70% of people over age 65 will require some long term care services (source: DHHS, 2008) For those age 65 and older, the average length of long term care is three years (source: LifePlans Long Term Care Market Summary 2010) The average annual cost of a nursing home is $71,175 for a semi-private room and $78,850 for a private room (source: LifePlans Long Term Care Market Summary 2010) In 2008, 40% of those who received long term care were between the ages of 18 and 64 (source: LifePlans Long Term Care Market Summary 2010) 30

31 LONG TERM CARE Identify the feasibility of long term care insurance as a solution Identify the most appropriate combination of protection across the benefit spectrum Traditional Linked Benefits Life Insurance with LTC rider Funding options for LTC Write a check 1035 Life policy cash values Turn Social Security on early and pay premiums with the income Why is the client having LTC coverage so important to your business as an advisor? So they don t deplete all the investment assets you ve worked hard to acquire! 31

32 QUALIFIED PLAN ASSETS Consolidation of accounts Streamline administrative burden Simplifies decision making process Reference IRA Rollover Chart When to start taking withdrawals from Qualified Plan Assets Based on clients cash flow needs RMDs Manage the process for the client Asset Allocation Probability of Success Model current expected return vs. recommended portfolio s expected return - RII Tools we use Riskalyze reference slide after next Setting expectations 32

33 QUALIFIED PLAN ASSETS CONT. 33

34 QUALIFIED PLAN ASSETS CONT. 34

35 SURVIVOR PLANNING Clients want to know how plan is affected if one of them passes away Run Survivor Model or What If scenarios RII Determine the need for death benefit What happens to sources of income? Social Security Spousal benefits Annuities Joint or single life Pension Joint or single life Pension maximization strategy Pension Maximization example: husband/wife with the option of single life or joint and survivor annuity. Single life = $4,500 per month for the rest of husband s life. Joint and Survivor = $3,000 over both lives. Determine if the $1,500 differential (after taking into account taxes) will buy replacement income through an insurance vehicle of at least $3,000 per month. If yes, elect single life option and leverage the differential. If no, elect joint and survivor option. 35

36 SURVIVOR PLANNING CONT. 36

37 SURVIVOR PLANNING CONT. Review existing Life Insurance coverage Keep Surrender Reconfigure death benefit and premiums 1035 Exchange 37

38 CYCLE OF OPERATIONS 38

39 DISCUSSION OUTLINE Discussion Outline is prepared for every meeting Benefits to the client Can track with us during the meeting Client can see and appreciate the depth of our preparation Deliverable for the client each meeting Benefits to the advisor Can refer back to know where you are in the case Track to run on Know what topics we want to cover and can get to the point CYA! 39

40 SAMPLE DISCUSSION OUTLINE FOR DATA MEETING #1 SAMPLE CLIENT DISCUSSION OUTLINE DATE I. CONFIRM DATA Review Preliminary Financial Condition Model Assets Liabilities Incomes Expenses Additional data needed Reference Design Notes in the Financial Condition Model II. CLEARLY DEFINE OBJECTIVES Retirement At what age Specific goals Travel Purchases for example, RV, 529 plan, etc. Survivor Income Amount of monthly after-tax spendable income Debts paid off Emergency fund reserves III. THE FIVE RISKS TO A SECURE RETIREMENT Sequence of Returns (withdrawal rate risk) Longevity outlive income Inflation and Taxes Market Volatility Long Term Care 40

41 DATA MEETING #1 Main objectives of meeting Confirm data Clearly define objectives Collect completed budget form Collect Social Security statement of projected benefits Introduce the 5 risks to a secure retirement We discuss the one pager on the sequence of returns risk Complete Riskalyze/Investor questionnaire 41

42 DESIGN PRESENTATION MEETING Discuss updated FCM/RII Cash flows Probability of Success Social Security Discuss report prepared by planning department Medicare Discuss actual costs and benefits for each Medicare approach Identify Case Themes (Problem areas) Need for predictable, recurring income Need for LTC Survivor Benefits Optimize Investment Portfolio 42

43 DESIGN PRESENTATION MEETING, CONT. Initial Try on Meeting Design Ideas For example, the LTC discussion Traditional annual premium vs. Hybrid Linked benefits This is introduced on a conceptual basis, no illustrations Draw it on the board Let them stew on it until the next meeting Specific solutions to come in the next meeting Illustrations Exact premium and benefit figures 43

44 DESIGN PRESENTATION MEETING, CONT. 44

45 DESIGN PRESENTATION MEETING, CONT. 45

46 DESIGN PRESENTATION MEETING, CONT. Recommend specific solutions to these issues Need for predictable, recurring income (Annuity) Need for LTC Survivor Benefits (Life Insurance) Optimize Investment Portfolio Present models that include the added expense of recommended solutions This illustrates how the payment for solutions will affect their cash flows, probability of success and answers the question, Can I afford it? LTC, Life, Medicare Reference next charts for LTC example 46

47 DESIGN PRESENTATION MEETING, CONT. 47

48 PLAN DELIVERY / IMPLEMENTATION MEETING Deliver final financial plan Objectives Observations Recommendations Review various models (RII/FCM) Current model Revised models Implementation Implementation checklist Schedule Personal Introduction meeting 48

49 RENEWAL PROCESS Our assistant Sandy sends out a letter in January scheduling their appointment for that year She then follows up 30 days prior to the meeting and confirms Requests data Some clients renew every year, others renew every 2 or 3 years Purpose of the renewal For client Is the plan on track? What changes, if any, need to be made Review of accounts For advisor Opportunities for additional implementation Opportunities for personal introductions Client retention 49

50 CASE STUDY #1 Business Owner, age 64, married Core Issues Case specific issues Value Gap Dollar amount needed by the sale of the business Living out of the business check book Dodgers season tickets Car Insurance Gas Maintenance Entertainment Travel Home repairs 50

51 CASE STUDY #1: THEMES AND IMPLEMENTATION Theme Solution Implementation (GDC) Retirement Game Plan Planning Fee $3,750 Create predictable income ChoicePlus Annuity $46,000 Mitigate LTC Risk MoneyGuard $18,000 Investments Tax Deferral 1031 Exchange $12,000 Investments Portfolio Premier $9,000 (trails) Pending Comp: $0 Introductions: 7 New Clients so far: 3 Total First Year GDC Annual Trails $88,750 $20,000 51

52 CASE STUDY #2 Couple transitioning to retirement 66 & 64 year old both flight attendants 30+ years Core Issues Case specific issues Low living expenses, good savers Both had defined benefit pensions & Social Security income No need to create additional predictable income Old life policies with high cash values Minimal need for death benefit 52

53 CASE STUDY #2: THEMES AND IMPLEMENTATION Theme Solution Implementation (GDC) Retirement Game Plan Planning Fee $3,500 Mitigate LTC Risk Moneyguard $28,600 Investments Portfolio AssetMark, REITs $13,500 Total First Year GDC Annual Trails $45,600 $2,500 53

54 CASE STUDY #3 Single, transitioning to retirement 68 year old female, management position - physical therapy Core Issues Case specific issues No debt - house paid for Modest living expenses Already receiving Social Security when we met Because it was in the first 12 months, we were able to get it suspended Benefits continued to accrue Wanted to retire right away Probability of success if retired right away was unacceptably low Postponed retirement for 2+ years Going to retire January 6th of

55 CASE STUDY #3: THEMES AND IMPLEMENTATION Theme Solution Implementation (GDC) Retirement Game Plan Planning Fee $3,500 Mitigate LTC Risk LTC Insurance Annual Premium $3,700 Create predictable income ChoicePlus Annuity $12,000 Investments Portfolio AssetMark, REITs $6,250 Total First Year GDC Annual Trails $25,450 $5,800 55

56 CASE STUDY #4 Married couple transitioning to retirement 64 year old CEO, 52 year old wife Core Issues Case specific issues Wants to move and retire out of state (CA -> WY) Considerable age gap No pension income Insurability issues Lends itself to taking Social Security earlier 56

57 CASE STUDY #4: THEMES AND IMPLEMENTATION Theme Solution Implementation (GDC) Retirement Game Plan Planning Fee $5,500 Create predictable income ChoicePlus & AXA Annuity $18,750 Income Tax Reduction Oil & Gas $6,300 Investments Portfolio AssetMark, REITs $24,400 Total First Year GDC Annual Trails $54,950 $7,200 Pending Comp: $16,000 Trails Investments Introductions: 1 New Clients so far: 0 57

58 CASE STUDY #5 Married couple transitioning to Retirement 65 year old mid level management, 60 year old teacher Core issues Case specific issues Rental properties & Teacher Pension Already made single life pension election prior to engaging our services Social Security planning Government Pension Offset She s not eligible for a spousal retirement benefit Eligible for in-service withdrawals Outright Distributions in RLT 58

59 CASE STUDY #5: THEMES AND IMPLEMENTATION Theme Solution Implementation (GDC) Retirement Game Plan Planning Fee $3,500 Replace Teacher pension income for survivor Mitigate LTC Risk Lincoln VUL $7,500 LTC Insurance Annual Premium $3,400 Investments Portfolio AssetMark, REITs $14,500 Pending Comp: $4,500 LTC Introductions: 0 New Clients so far: 0 Total First Year GDC Annual Trails $28,900 $5,000 59

60 CONCLUSION Opportunity in Retirement Planning Baby boomers 10,000 retiring a day for the next 17 years Position your practice to be advisor of choice for retirement planning Core Issues Process Add tremendous value to your clients financial lives Grow your practice 60

61 QUESTIONS For agent or broker use only. Not for use with the public. LCN-XXXXXX-XXXXXX 61

62 THANK YOU For agent or broker use only. Not for use with the public. LCN-XXXXXX-XXXXXX 62