Oct 5, 2015 | Retirement, Social Security
Just 28 percent of Americans received a passing grade (60 percent or higher) when asked basic Social Security questions, a new study from MassMutual finds. Moreover, from a pool of 1,500 respondents ages 18 to 65, just one person answered all 10 true/false questions correctly. The quiz touched on a range of topics, including the national retirement age, spousal benefits and eligibility for benefits. The high failure rate suggests what a number of advisors already know: Too many Americans are lacking the knowledge and tools that will allow their retirement reality to match their retirement dreams. “Perhaps the greatest Social Security deficit in this country is the lack of education around the retirement benefits of the program, which presents an opportunity and responsibility to financial professionals,” said Michael R. Fanning, executive vice president, U.S. Insurance Group, MassMutual. “With millions of Americans nearing retirement each year, many may be at risk of underutilizing a critical component of their retirement income stream.” If there’s a silver lining, it’s self-awareness: Just 8 percent of those surveyed considered themselves to be very knowledgeable on the subject of Social Security. And that’s where you come in. How does your own knowledge stack up? Continue reading for the full quiz. 1. True or False? Social Security retirement benefits are based on my earnings history, so I’ll receive the same monthly benefit amount no matter when I start collecting. A: False. If you collect Social Security retirement benefits before reaching full retirement age, you effectively lock in a lower monthly benefit amount. If you wait to begin collecting until after you reach full retirement age, you become eligible for delayed...
Sep 21, 2015 | Life Insurance, Retirement, Social Security
The Supreme Court ruling legalizing marriage in all states for same-sex couples is a landmark decision in the equal rights arena. However, the ruling also has important financial and tax implications — implications that same-sex clients now need to be advised upon in order to avoid any planning surprises down the road. While the ruling eliminates the patchwork of state-specific rules that could confuse even the most competent financial advisor, it is critical that advisors in all states familiarize themselves with the important planning issues that same-sex couples now need to consider — whether or not they have chosen to marry. Some of the issues are fairly simple and well-settled, but the subtleties and complexities of the rules need to be considered in order for same-sex married couples to make informed planning decisions going forward. Estate and gift tax issues While same-sex spouses now have the same rights as opposite-sex spouses to inherit from one another even in the absence of a will, federal estate tax rules have evolved in recent years to make it easier for married couples to avoid transfer taxes when passing wealth after death. Same-sex clients are now able to take advantage of these special rules. For example, the $5.43 million (in 2015) exemption is portable between spouses if an election is made on a properly-filed estate tax return — meaning that same-sex couples can now count on shielding a combined $10.86 million from estate taxes without worrying about which spouse technically owns the assets. Same-sex married couples should be advised to review their estate planning documents to take into account the fact that these taxpayers are now entitled...
Sep 7, 2015 | Life Insurance
Where will you be when money is on the move? Will you be positioned properly with a significant number of clients when they experience a life-changing event? Are you staying in touch so that you are their go-to person when those life-changing events take place as they surely will? According to a 2008 study by the Bureau of Labor and Statistics, half of people age 55 to 64 had an average tenure of less than 9.9 years. They may have retired or just changed jobs. Either way, over half of those surveyed could have moved money from their qualified plans from age 55 to 64. There are 108 million Americans above the age of 50 according to the latest data at the U.S. Census Bureau. Establishing a relationship with the client at any level with any product positions the producer so that when the money moves, that producer will have an excellent chance of doing further business with that client. What will establish the relationship? Any amount of assets under management is one answer. It is very dangerous to take the exception for rules and make them a rule. We hear of advisors who only take larger quantities of assets or they don’t want the client. What is not discussed is how they are able to do that. For those of us who are not in a strong enough position to command such rules, we have to fight our way up the ladder to millions under management. In the meantime, how can we make money? Insurance is a great answer. Establishing a relationship with an insurance product and making...
Aug 24, 2015 | Life Insurance, Retirement
Life insurance truly is a multipurpose solution. Savvy financial professionals are leveraging the power of innovative life insurance strategies to counteract some key tax planning and estate transfer needs for affluent and super-affluent consumers alike. Definitions of wealth categories vary, but for the purposes of this article, affluent consumers are defined as having $1 million to $5 million in investible assets (excluding their home) and super-affluent clients as having $5+ million. First, let’s explore a particular wealth transfer issue that, in my experience, tends to impact affluent as well as super-affluent consumers. Then, we’ll review some other challenges that may impact clients in the two wealth categories. 1. Explore the IRA wealth transfer issue Many people who have been successful in saving for retirement have established a sufficient nest egg to be able to create a legacy for their children, grandchildren and favorite charities, leaving them to wonder how best to leverage their qualified or tax advantaged retirement plans. A common question is whether individual retirement account (IRA) owners should take larger withdrawals and pay income taxes now, or take out as little as possible during their lifetime, leaving a likely income tax burden for their heirs and beneficiaries. If an IRA owner seeks to protect loved ones and maximize wealth transfer, he or she can utilize life insurance to minimize the tax burden that inheriting an IRA may impose on a beneficiary. Two solutions described here — a “tax offset” strategy and a “tax elimination” strategy — can help the client maximize the after-tax value of the IRA or eliminate taxes paid on the IRA inheritance. Keep in mind, however,...
Aug 10, 2015 | Retirement
Speakers had more meat for the annuity community than for the long-term care insurance (LTCI) industry today at the White House Conference on Aging. The Obama administration used the 2015 event to promote a U.S. Department of Labor fiduciary standard proposal that the National Association of Insurance and Financial Advisors (NAIFA) hates — and it unveiled a Labor Department retirement benefits annuitization proposal that retirement plan advisors might like. The administration also announced smaller-scale proposals for improving retirement benefits and caregiver support. President Obama said in a speech at the conference that preparing for retirement is getting tougher. “Too many older Americans leave the workforce without having saved enough for a dignified retirement,” Obama said. “It’s not as if they haven’t tried. There are a lot of folks out there who work really, really hard, but, at the end of the day, still don’t have enough of a nest egg.” Presidents have been organizing the conference events roughly every 10 years since the days of the Kennedy administration. Belle Likover, a social worker, talked in a video shown during the conference about meeting the late Rep. Claude Pepper, a leader in aging policy efforts, at the 1995 White House Conference on Aging. “The thing that strikes me,” she said, “is that the issues are the same year after year.” But, in some cases, all of the talk at an aging conference turns into changes that have major effects on insurers, producers and policyholders. For a look at some of the changes discussed at the White House today, read on. 1. Annuitization selection safe harbor clarification Labor Secretary Thomas Perez promoted the Obama...
Jul 27, 2015 | Life Insurance
By James A. Mallon October 31, 2014 — As 2015 approaches, I’m struck by the persistency of three glaring needs and the resounding calls to action they pose for producers. The new year will usher in new opportunities to help Americans with: • Providing death benefit protection for their families. • Facilitating sufficient income during retirement. • Providing safe harbor from the financial destruction that chronic illness and other contingencies can wreak. The challenge is clear: Recognize opportunity before it becomes common knowledge, and respond with modern, multi-purpose solutions to differentiate yourself and be worth more to clients than the commissions you are paid. Before the market fluctuations of 2008, the chatter in the pre-retirement corridor seemed to focus primarily on the potential for massive wealth transfer. Today, the conversation seems to center on three contingencies staring Americans in the face: dying too soon, outliving retirement income or grappling with chronic illness along the way. Research continues to point to the need for protection against such contingencies. In fact, according to the Insured Retirement Institute, nearly two thirds of recently surveyed Americans age 55 and older said they feared outliving their assets more than they feared dying. Nearly half of Americans ages 45-70 reported having no financial plans to protect them from outliving their assets and the escalating cost of health care should they live longer than anticipated. No matter what resources people have, they care about making sure their families are financially protected if they die prematurely, about having sufficient income to preserve their quality of life if they outlive their life expectancy, and about being able to...
