One of the best retirement income analogies I've heard is that of the "back nine." In this analogy, Dave Zander of Back Nine Financial says that a round of 18-hole golf is a lot like life itself.
- The front nine is like the first part of your life, when you're employed and actively earning new income every year.
- The back nine is retirement and the rest of your life; it has the same traps and hazards as the first nine, and you need the right tools to navigate the course - but where is your new income?
Open any newspaper or financial publication and sooner or later, you'll read an alarming report: There is a looming crisis in the retirement sector as baby boomers start to enter their retirement years and have underfunded nest eggs.
In other words, we're forgetting that we still have to play the back nine.
In the overall investment market, most clients tend to be conservative because they don't want to risk their savings and future income. Unfortunately, risk-averse investing can overcompensate and lead people -- and their advisors -- to put all their investments into fixed accounts that don't give the return they truly need.
The best way to help your clients -- particularly the "sandwich earners" in the $200,000 income bracket -- is to guide them to a product designed to safely and efficiently accumulate wealth.
The right product
Global indexed universal life could be the most appropriate investment vehicle for your clients who aren't yet saving enough and still have time to allow wealth accumulation features to kick in. It's a different asset class that people can have in addition to stocks and bonds - an insurance product with upside potential and a guarantee.
Consider the recent volatility of 401(k) and pension plans, and the job market itself. With global indexed UL, we can dial down our clients' ambiguity, frustration, and uncertainty when trying to pick the right sector of the market, and instead use a product that is guaranteed and largely self-directed.
How do the best global indexed UL products work? Look for products that allocate funds based on how the indices perform - for example, one that weights the allocation based on the results:
- Seventy-five percent of the first place or top-performing index
- Twenty-five percent of the second place
- Zero percent from the third-place performer
A weighted allocation such as this can reassure your risk-averse clients that their money is safe and safely accumulating more wealth.
In addition to being a great retirement planning product, global indexed UL has other important uses, as well:
- Death benefit
- College funding
- Wealth accumulation
- Protection from inheritance taxes
How to choose
All indexed products carry a guarantee, and some of the products exceed the interest rates currently given on 10-year treasuries. However, not all global indexed UL products are alike. When considering the best products for your clients, look for features including:
- An indexed product that has international exposure with three indices
- A look-back feature that enhances performance
- A product that is weighted, so it takes the anxiety out of picking the "right" indices
Comparison-shopping among qualified carriers will help you find the ideal guaranteed indexed UL for your clients, and help make their "back nine" as successful and enjoyable as the front nine.
Durr Sexton is the senior vice president and chief distribution officer of American General Life Companies. He can be reached at email@example.com.