As millions of baby boomers head toward retirement, many are seeking financial solutions to adequately fund their later years, ensure their savings last throughout their lifetimes, and fill existing savings gaps. Variable annuities are uniquely positioned to address these needs by combining insurance benefits, tax-deferred earnings, and the option for lifetime retirement income.
While the oldest boomers are just entering retirement, the youngest are still working, saving, and starting to plan for the future. Many trailing-edge boomers (the younger ones) expect income shortfalls in retirement and want to aggressively save over the next 10 to 20 years, making them excellent prospects for variable annuities.
"Thriving in Retirement," a recent survey of baby boomers (ages 45 to 64) by Thrivent Financial, revealed a startling disparity between pre-retirees' ideal plans and their actual retirement readiness. Over half (56 percent) of the pre-retirees surveyed expected to enjoy a standard of living similar to or better than their own parents. Seventy-one percent, however, felt a lack of money in retirement may prevent their plans.
How can you help boomers prepare for more financially secure retirements while leveraging your variable annuity sales? Consider these boomer-savvy marketing tips:
o Recommend variable annuities as part of a retirement income plan versus making a solely product-specific sale. Demonstrate an understanding of boomers' retirement dreams and fears and guide them in assessing their sources of retirement income and how much they will need to fund their desired retirement lifestyle.
o Position variable annuities as solutions for aggressively saving for retirement, especially among high-income pre-retirees who are late savers. Encourage them to maximize their savings in employer-sponsored plans and individual retirement accounts (IRAs) first, then exhort them to accumulate as much as possible in variable annuities (VAs). Remind them that VAs do not have contribution limits.
o Demonstrate how variable annuities can create personal pensions that boomers can count on in retirement. In meetings, discuss the many factors that aren't guaranteed in retirement such as when you will die, how many years you will spend in retirement, the costs for health and long term care, and the long-term viability of government programs such as Social Security and Medicare. Point out that while they can't control these factors, their annuity payments are guaranteed for their lifetime.
o Target your sales pitch to the stage of life, not the age of the boomer. Boomers are a remarkably diverse group, and they want to be treated as individuals with unique needs. For example, don't assume that all 55-year-old prospects have similar financial needs. One may have grandchildren in college while another may have children in grade school. One may be already retired while another plans to work for another 20 years.
o Insulate clients against market downturns with living benefits. For risk-averse and security-conscious boomers, emphasize the growth and safety benefits of variable annuities and the optional benefit riders available in the market today.
VA owners can also benefit from living benefit guarantees. These guarantees, backed by the issuing insurance company, vary greatly, but most have extra fees and return principal in the form of a series of payments.
o Keep it simple but offer comprehensive information. Provide boomers with all the facts about VAs, but take care not to overwhelm them with details. Recognize that you are selling a complex product to consumers who may have heard negative stories in the media. Realize that boomers will need to draw their own conclusions about the product.
o Provide service, support, and information via technology and online tools. Most boomers are technologically savvy. You may want to try providing information and ongoing sales messages via email.
o Target women. The unique retirement income needs of women (longer life expectancies and lower retirement incomes) make them strong prospects for the lifetime income streams and growth potential of VAs. Know the unique financial needs of widows and divorcees and how they can be met through VAs. Boomer women can expect to live 15 to 20 years as widows, creating an opportunity to discuss the importance of death benefits with pre-retired couples.
o Showcase how variable annuities put boomers in control. With variable annuities, boomers can control how they invest their assets, how much they invest each year, and how and when they are paid out. Further, they can postpone payments until they need the income. Stress that annuities take the guesswork out of managing retirement income streams but still provide individual investment control.
o Sell "value" and promote an annuity's package of benefits vs. other retirement investments. VAs offer everything from tax control to protection within a single investment. Highlight the unique combination of benefits received along with the costs and expenses of variable annuities, showcasing guaranteed death benefits, potential living benefits, tax-deferred growth, and the potential to diversify assets and manage risk. Illustrate the challenges and historically low returns facing individuals who self-annuitize their retirement investments amidst longevity, inflation, and withdrawal risks.
o Prepare for common objections to annuities. If access to assets is an issue, recommend products that allow access to a portion of the annuity balance. Annuitizing a portion of a boomer's retirement portfolio or using phased annuitization may relieve anxiety and increase comfort.
The baby boomer generation faces unprecedented opportunities and challenges in retirement including longer life spans, more time in retirement, the potential instability of Social Security and corporate pensions, increased reliance on personal savings, and possible shortfalls in retirement income and assets. Variable annuities offer a unique combination of benefits that address these issues and provide value in boomers' retirement income plans. By understanding the retirement fears and dreams of baby boomers as well as their diverse attitudes and beliefs, sales reps can leverage variable annuity sales and build long-term relationships with the next generation of retirees.
Ann Koplin is director of annuity product marketing for Thrivent Financial for Lutherans.
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