Don't Enter through the Exit -Proper Ways to Approach and Illustrate IUL for Retirement Income

By Lisa "Lee" Morris
VP of Underwriting and Development,
Partners Advantage Insurance Services

An experienced financial professional knows all aspects of transferring wealth, replacing income, protecting assets and certainly providing supplemental retirement income all using life insurance products. IUL products have gained great traction in the marketplace as they address many of these aspects, but particularly retirement income. Although the main premise of life insurance is to replace a financial loss, why not accomplish even more by replacing a financial loss AND preparing for retirement. 

Here is the key if you decide to use this strategy. Make sure that you do not enter through the exit door by calculating the retirement income first and then solving for the face amount. An applicant still has to financially qualify and justify the amount of total insurance for which they have applied. Many financial professionals will simply ask an applicant how much sounds like a good idea for your retirement needs and create illustrations based upon the applicant’s response. However, the correct approach is to determine the total amount that the applicant can qualify for coverage and THEN illustrate the amount of retirement income that the applicant will be able to withdraw as retirement income without collapsing the policy. By following this technique, you can adequately meet financial justification and participate in a much smoother ride to policy issue.


For financial professional use only. Not for use with consumers.

Partners Advantage Insurance Services and their representatives do not give tax or legal advice. The material in this article is provided for informational purposes only and should not be construed as tax or legal advice. Guarantees and benefits are based on the claims-paying ability of the issuing insurance company. Keep in mind that most life insurance policies require health underwriting and, in some cases, financial underwriting.

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Providing More Retirement Income Options for Your Clients

As more companies do away with defined benefit pension plans, it is left as the responsibility of individuals to ensure that they have enough income for retirement. While many people may fear outliving their savings, other threats to both long- and short-term retirement incomes can include: 

• Inflation
• Market uncertainty
• Medical expenses

Longevity only magnifies these risks, as living to an older age means that these risks must be managed for a longer period of time. Because of this, many consumers over the past few years have been turning to income producing products, as these insurance vehicles can allow them a guaranteed* incoming cash flow, oftentimes without regard to market performance, or even surrounding economic issues. This has recently led to strong sales of fixed indexed annuities (FIAs), deferred income annuities (DIAs), and single premium immediate annuities (SPIAs).

Some of the clients that these products may be well suited for can include those who: 

• Are seeking to compliment other income sources such as Social Security
• Do not have any type of guaranteed* income or defined benefit pension plan in place
• Are risk-averse and are seeking to protect the premium, while at the same time seeking market indexed growth
• Are looking for a way to convert large sums of cash from retirement plans into immediate income

Although all clients’ situations are unique, the benefits that are offered through these products can cover a variety of different needs. By not having these vehicles available, it is possible that you might be leaving the door open for clients to go elsewhere to take care of their retirement income needs – possibly taking other business with them in the process. But, by becoming familiar with how FIAs, DIAs and SPIAs can provide growth, and protection of premium, client portfolios and long-term client relationships can be strengthened.

Contact Partners Advantage Annuity Brokerage Team

for More Information and Complete Product Assistance:

888-251-5525, Ext. 709

* Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of premium and credited interest, and the reassurance of a death benefit for beneficiaries. Any distributions may be subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax. Early withdrawals may result in loss of principal and credited interest due to surrender charges.

Partners Advantage Insurance Services and its representatives do not give legal or tax advice. Consult your tax advisor or attorney for legal or tax advice.

A fixed indexed annuity can provide annuitization as a means to provide retirement income payments. An alternative option to annuitization could be the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.

Please note that in order to provide a recommendation to a client about the liquidation of a securities product, including those within an IRA, 401(k) or other retirement plan, to purchase a fixed or variable annuity or for other similar purposes, you must hold the proper securities registration and be currently affiliated with a broker/dealer or registered investment adviser. If you are unsure whether or not the information you are providing to a client represents general guidance or a specific recommendation to liquidate a security, please contact the individual state securities department in the states in which you conduct business.

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH CONSUMERS.

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How You Can Help Clients Find Financial Confidence for Retirement

The visual picture of retirement is normally laid-back days spent traveling, enjoying hobbies, and being with family and friends. The problem is many people don’t properly plan for retirement and this vision is never achieved. The other issue is companies are moving away from pension plans, so the responsibility of having enough income for retirement is landing largely on the consumer. This is where a financial professional can step in and provide options for helping build a stable financial future for their client.

One option to share with your client is the various types of annuities, as many of them can bridge the gap between money received from pensions and social security and the money needed to handle living expenses during retirement. Fixed indexed annuities can also provide guaranteed* lifetime income and have the ability to accumulate wealth for retirement. It can offer protection against certain risks that could potentially deplete a client’s future savings, as well as provide built-in flexibility in case needs change.

The clients who are able to maintain their standard of living during retirement, have assets for times they may need them, and have the potential to accumulate wealth will most likely be interested in an annuity purchase. This is why many financial professionals often feel confidence when recommending fixed indexed annuities to clients. Of course, they aren’t going to be suited for everyone, but they may be a good fit for those who:

• Seek to complement other income sources, such as Social Security
• Are looking to protect premium, while also seeking potential market indexed growth
• Don’t already have a type of defined benefit pension plan or guaranteed* lifetime income in place
• Desire a flexible plan that is adaptable to changing needs
• Looking for ways to convert sums of cash from retirement plans into immediate income

While sharing about annuities, make sure to inform each client about all aspects of the product before making a purchase. Helping them make informed decisions about their future now can help them actually enjoy those hard-earned days during retirement.

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH CONSUMERS.

*Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank of the FDIC. A fixed indexed annuity can provide annuitization as a means to provide retirement income payments. An alternative option to annuitization could be the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.

Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of principal and credited interest, and the reassurance of a death benefit for beneficiaries. Please note that in order to provide a recommendation to a client about the transfer of funds from an investment product to a fixed insurance or annuity, you must hold the proper securities registration and be currently affiliated with a broker/dealer.  If you are unsure whether or not the information you are providing to a client represents general guidance or a specific recommendation to liquidate a security, please contact the individual state securities department in the states in which you conduct business.

This information is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney.

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FIAs for Guaranteed* Retirement Income

In today’s world, the markets can change from day to day. There can be a pattern of growth or a quick downhill slide, which can make some clients nervous about planning for the future. This is why configuring the “Gold Standard” safe withdrawal rate with fixed indexed annuities was so profound to the financial industry and retirement planning.

The year was 1994, and there was a CFP from California that would create one of the most profound “rules of thumb” for retirement income that has ever been created. William Bengen wrote an article which appeared in the Journal of Financial Planning, and it released the results of this very profound study that he had just undertaken.

This study is what started the “Gold Standard” safe withdrawal rate of 4%. William basically said that even though over time the market had averaged around 10%, in the distribution years, it doesn’t mean that a client can “safely” withdraw 10% from their portfolios. So, what William did is he back tested hypothetical retirement “start dates,” assuming a 50% stock and 50% bond portfolio all the way back to the 1920s, using the actual stock and bond market performance. After the analysis was said and done, he said that consumers were “safe” by withdrawing 4% of their initial portfolio value per year adjusted for inflation or deflation. By “safe,” what he meant was that the 4% distributions were very unlikely to spend down the client’s portfolio/retirement money before the end of the 30-year retirement.

As a matter of fact, in his study, he had a 100% success rate using the 4% rule for retirement income. As a result of this study, securities reps for almost two decades have been living and dying by this rule. If a client has a million dollars at retirement, then the client should not take more than $40,000 during the first retirement year, for example.

A later study was done in 2013 that was coauthored by Morningstar Inc. It established, in this new world of volatile markets and low interest rates, that the new “safe withdrawal rate” is actually 2.8%. The study indicated that with today’s low interest rates, market volatility, and SEQUENCE OF RETURNS RISK that there is almost a 52% chance of failure using the 4% rule. Would you get on an airplane if there was a 48% chance of having the number of landings equal the number of takeoffs?

So, how do you handle this risk? Before looking at what a GLWB can do for this client on a “guaranteed* basis,” I want to point something out. When you look at this risk that we just discussed, which is the client losing 20% of their portfolio value or taking a major pay cut in retirement, or having to delay retirement, this risk is just as catastrophic as say a car crash, a medical emergency, a house fire, etc. Or, maybe even death itself. What is my point? My point is, when risks in our lives are catastrophic, should they occur, we take actions to hedge those risks. What do we use? We use something called insurance.

• Car crash = Auto insurance
• House fire = Homeowners’ insurance
• Death = Life insurance

 Why would you treat this shortfall risk as anything different? Is it not “worth” insuring?

Learn more about fixed indexed annuities for guaranteed* income. Download our complete whitepaper: “The Stars are Aligned for Fixed Indexed Annuities and Guaranteed Lifetime Withdrawal Benefits.”

Fill out my online form.

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH CONSUMERS.

*Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank of the FDIC.  Guaranteed lifetime income available through annuitization of the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.

Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of principal and credited interest, and the reassurance of a death benefit for beneficiaries. Please note that in order to provide a recommendation to a client about the transfer of funds from an investment product to a fixed insurance or annuity, you must hold the proper securities registration and be currently affiliated with a broker/dealer.  If you are unsure whether or not the information you are providing to a client represents general guidance or a specific recommendation to liquidate a security, please contact the individual state securities department in the states in which you conduct business.

This information is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney.

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