SAN DIEGO — Death and taxes may remain life's only pair of certainties, but if the last several decades have shown us anything, it's that death's taking longer to show up, while we can't seem to keep the taxman from coming back.
In his presentation Monday at the 2015 NAPA 401(k) Summit here, John Blossom Jr., president and CEO of Alliance Benefit Group of Illinois preached about the importance of aggressive — and creative — longevity management.
Over the last 60 years, the average lifespans for both men and women have crept up roughly 10 percent, from 77.9 for men to 86.6 (while women have jumped from and average of 80.9 years to 88.8 years). Worse (or better, I suppose) is that most 65-year-olds can expect to live anywhere from 10 to 20 years.
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There's little doubt that 70 is the new 65. Are your clients prepared for that? Or are you — and your employer clients — still leaning on outdated preconceptions built on dusty data — much like the federal government.
Obviously, the new IT kid in the retirement space is a product still getting its sea legs, but tailored perfectly for addressing client longevity concerns.
A qualified longevity annuity contract, according to the experts, "is an annuity contract that is purchased within a traditional retirement plan, under which the annuity payments are deferred until the client reaches old age (they must begin by the month following the month in which the client reaches age 85) in order to provide retirement income security late in life."
Sure, few carriers have stepped up to offer these nascent investment instruments, but some have begun to test the waters, including Principal and AIG.
And while Blossom touched briefly on reverse mortgages as a potential alternative revenue stream for retirees, many advisors tend to stay away from these danger-prone products.
No, Blossom's focus remained steadfast on Social Security and approaching it with clients as just another potential revenue stream, another financial instrument to be examined, and implemented as part of a larger investment strategy. Or, as Blossom called it, "Social Security and the big five years."
In fact, as Blossom pointed out, "Social Security makes up 85 percent of retirement income for 50 percent of retires."
So why should advisors approach it any differently than your clients' IRA or life insurance policy? Especially when so much money is hanging in the balance? The slightest mistake can costs retirees hundreds of thousands of dollars over the course of a retirement. And advisors stil have much to learn when it comes to navigating the minefield of regulation surrounding Social Security. So how well prepared do you think your clients are?
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