RETIREMENT INCOME SECURITY PLANNING€¦ · – Retirement Planning Process – “If you don’t...

RETIREMENT INCOME SECURITY PLANNING “Maximizing Your Impact”

Presented by Joseph W. Brezden CLU®, ChFC®, CFBS, CRPC® Brezden Wealth Advisors

©2016 Lincoln National Corporation For education and training purposes. Not for use with the public. CRN-1573765-081816

• 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

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INTRODUCTION

For agent or broker use only. Not for use with the public.

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• 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

WHY RETIREMENT PLANNING?

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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

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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

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• Brezden Wealth Advisors – Launched in 2013

• Michael Brezden, CFA – Junior Planner – Gen 2 Program

• Sandy Poznoski – Admin/Practice Manager – Assistant for 27 years

PRACTICE STRUCTURE


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• 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)

TRANSITION TO RETIREMENT INCOME ILLUSTRATOR SOFTWARE


CYCLE OF OPERATIONS

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• 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

MARKETING

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IDEAL CLIENT PROFILE

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INTRODUCTIONS

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INTRODUCTIONS

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• 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

APPROACH TALK

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• Retirement Planning Bridges – Financial Independence – Efficient Frontier – Volatility – Long Term Care – Survivor Income – Social Security – Outright Distributions

APPROACH TALK

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• Drill & Rehearse – Monday morning Drill &

Rehearse – D & R Partner – Time block on calendar

• Lincoln meetings – PEAK – Fall Focus – TRG

• 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?”

CLIENT CONCERNS

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• Cash Flow • Budget • Accumulation vs. Distribution • Social Security • Medicare • Long Term Care • Management of Qualified Plan Assets • Survivor Planning

CORE RETIREMENT PLANNING ISSUES

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• 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 .

CLIENT CASH FLOW CONCERNS

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RETIREMENT INCOME MATRIX

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• 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:

BUDGET FORM

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• Up until Retirement, the focus is accumulation – The sequence of returns may have less of an impact on the portfolio of a long-

term 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

ACCUMULATION VS. DISTRIBUTION

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ACCUMULATION VS. DISTRIBUTION CONT.

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• 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

SOCIAL SECURITY

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SOCIAL SECURITY CONT.

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• 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

MEDICARE

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MEDICARE CONT.

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MEDICARE CONT.

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• 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

• 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)

LONG TERM CARE

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• 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!

LONG TERM CARE

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• 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

QUALIFIED PLAN ASSETS

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QUALIFIED PLAN ASSETS CONT.

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QUALIFIED PLAN ASSETS CONT.

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SURVIVOR PLANNING

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• 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.

SURVIVOR PLANNING CONT.

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• Review existing Life Insurance coverage – Keep – Surrender – Reconfigure death benefit and premiums – 1035 Exchange

SURVIVOR PLANNING CONT.

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CYCLE OF OPERATIONS

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• 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!

DISCUSSION OUTLINE

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SAMPLE DISCUSSION OUTLINE FOR DATA MEETING #1

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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

SAMPLE CLIENT DISCUSSION OUTLINE

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• 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

DATA MEETING #1

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• 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

DESIGN PRESENTATION MEETING

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• 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

DESIGN PRESENTATION MEETING, CONT.

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• 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


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• Deliver final financial plan – Objectives – Observations – Recommendations – Review various models (RII/FCM)

– Current model – Revised models

• Implementation • Implementation checklist

• Schedule “Personal Introduction” meeting

PLAN DELIVERY / IMPLEMENTATION MEETING

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• 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

RENEWAL PROCESS

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• 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

CASE STUDY #1

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CASE STUDY #1: THEMES AND IMPLEMENTATION

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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)

Total First Year GDC Annual Trails

$88,750 $20,000

• Pending Comp: $0 • Introductions: 7 • New Clients so far: 3

• 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

CASE STUDY #2

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Mitigate LTC Risk Moneyguard $28,600

Investments – Portfolio AssetMark, REITs $13,500


$45,600 $2,500

• 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 2017

CASE STUDY #3

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Mitigate LTC Risk LTC Insurance – Annual Premium

$3,700

Create predictable income ChoicePlus Annuity $12,000



$25,450 $5,800

• 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

CASE STUDY #4

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Create predictable income ChoicePlus & AXA Annuity $18,750

Income Tax Reduction Oil & Gas $6,300



$54,950 $7,200

Pending Comp: $16,000 Trails – Investments Introductions: 1 New Clients so far: 0

• 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

CASE STUDY #5

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Replace Teacher pension income for survivor

Lincoln VUL $7,500

Mitigate LTC Risk LTC Insurance – Annual Premium

$3,400



$28,900 $5,000

Pending Comp: $4,500 LTC Introductions: 0 New Clients so far: 0

• 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

CONCLUSION

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QUESTIONS

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

THANK YOU

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

RETIREMENT INCOME SECURITY PLANNING€¦ · – Retirement Planning Process – “If you don’t...

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