Income Planning

4 Reasons to Focus on Income Planning

We have to look at the future in terms of our clients’ needs – beyond technology. We are going to be forced to generate more income for longer periods of time with fewer assets than ever before.”

Over the years, I have traveled around the country to visit advisors. Regardless of when I traveled or where I’ve gone, there has always been an inclination that our industry will be replaced by technology.

Many firms have established some type of robo-advisor platform to attract the younger generation of investors. But we have to look at the future in terms of our clients’ needs – which goes beyond access to technology. 

I feel confident and bullish in our industry. And I believe we need to reinvest in people to help overcome the challenges that so many Americans face during retirement. Here are four reasons:

1. 10,000 Americans retire every day.

This number will not decrease significantly until after 2030. There is a nearly endless flow of prospective clients for our industry to help. In fact, I would argue that we are underserving the majority of retirees because we don’t have enough advisors in our industry today.

2. Social security continues to be misused.

Even with all the education that our industry has provided over the past decade, less than 5 percent of retirees maximize social security and defer the income to age 70. Case study after case study shows the benefits of the primary wage earner delaying income.

3. We continue to live longer.

According to the CDC, Americans are living 2.5 years longer for every decade since 1900. But we have saved less money than we have at any time in American history. The combination of these facts means that we will have to provide more income for a longer period of time with fewer assets than any planners before us.

4. Annuities are one of three vehicles to protect against longevity.

Defined benefit plans continue to be removed from employees’ benefits. Social Security provides longevity and inflation protection to some extent. However, annuities are the only vehicle into which Americans can put their hard-earned assets to gain mortality credits that help offset longevity.

All of these reasons translate into one simple statement: We are going to be forced to generate more income for longer periods of time with fewer assets than ever before.

This will be a challenge that haunts our industry for decades to come. It’s not going to be solved by a robo-advisor or technology platform. Instead, it’s going to be solved by changing the decisions we and our clients make in retirement. And human nature changes by leaders focused on our clients and their concerns, not programs.

Winning Strategy: Focus your client process on understanding and educating about the longevity conundrum. Living longer means you need to think, act, and behave differently than you would during the accumulation phase of income planning.

*This material is for financial professional and educational use only. Not to be reproduced or shown to clients.