A
l a i c o S
ALSO INSIDE: The Dynamic Du of Social Securito y Planning PAGE 8
Dilemma
Social Security faces th reats from a variety of sources but remains the centra l retirement tool for m ost Americans. Advisors are finding su ccess (and business) be coming experts in Social Securi ty strategies.
PAGE 18
WHAT IS YOUR SOCIAL SECURITY RISK SCORE?
Experience this new lead generation tool that will transform how you connect with clients.
PAGE 6
THE #1 UNADDRESSED QUESTION CLIENTS ASK: Am I at risk for Social Security benefit reductions? NOW, YOU HAVE AN ANSWER.
SHOWCASE YOURSELF AS AN EXPERT
The Social Security Risk Score is a lead generation tool that showcases you as the expert who can help solve your clients’ largest unaddressed concern in retirement planning.
GROW YOUR BOOK OF BUSINESS
The Social Security Risk Score differentiates you from the competition. Diagnostic tools with personalized reports for your client’s unique situation, empower you with a new story to reconnect with existing clients and attract new prospects.
EXPERIENCE TODAY
Great products should sell themselves. Experience the Social Security Risk Score for free with no obligations.
TRY IT NOW
RiskScoreAdvisor.com
Life Insurance | Annuities | Asset Protection
Protecting what matters most. Together. Your clients count on you to help them protect what matters most. And for more than a century, you’ve trusted Protective to work as hard as you do for your clients and help you deliver the sense of security they deserve. Now, more than ever, Protective is here for you with a bold new energy and renewed commitment to helping you make life insurance and annuities more accessible to more people. We’re here to help your clients be more confident, to help you protect more people and to help you grow your business. Because in the end, we’re all protectors. protective.com/protectors The Protective trademarks, logos and service marks are property of Protective Life Corporation and are protected by copyright, trademark, and/ or other proprietary rights and laws. Protective and Protective Life refers to Protective Life Insurance Company (PLICO) located in Nashville, TN and its affiliates, including Protective Life & Annuity Insurance Company (PLAIC) located in Birmingham, AL. Insurance and annuities are issued by PLICO in all states except New York and in New York by PLAIC. Product availability and features may vary by state. Each company is solely responsible for the financial obligations accruing under the products it issues. Product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Insurance and Annuities are: Not a Deposit | Not Insured by any Federal Government Agency | Have no Bank or Credit Union Guarantee | Not FDIC/NCUA Insured | May Lose Value CLABD.2925266.07.21
IN THIS ISSUE
View and share the articles from this month’s issue
» read it
FEBRUARY 2022 » VOLUME 15, NUMBER 02
HEALTH/BENEFITS
FEATURE
A Social Dilemma
18 INFRONT
4 C OVID-19 Mortality Spike Hits Insurers By John Hilton The pandemic death rates have exceeded even the most conservative projections for some insurers.
By John Hilton Social Security faces threats from a variety of sources, but remains the central retirement tool for most Americans. Advisors are finding success (and business) becoming experts in Social Security strategies.
IN THE FIELD 12 N ot Your Father’s Advisor
By Susan Rupe Jessica Weaver is forging her own path in the industry, while sharing her passion for helping women learn all they can about money.
LIFE
ADVISORNEWS
38 3 Ways To Change Communities Through 401(k) Plans By Amie Agamata A 401(k) plan can provide an opportunity to make an impactful difference in employees’ lives.
MULTILINE
BUSINESS
ANNUITY
Marc Kiner and Jim Blair saw a need for advisors to be educated about helping their clients plan for Social Security. So they created their own program.
By Mike Wilbert Employees say they are stressed and depend on their workplace benefits to boost their financial wellness.
By Adam Graham Why your clients need to start protecting their homes before wildfire season starts.
By Debbie Rooks Tips on having a successful first meeting with smallbusiness owners.
8 T he Dynamic Duo Of Social Security Planning
34 Workers Have Spoken: Financial Well-Being Benefits Matter
42 Now’s The Time For Clients To Think About Wildfire Threat
26 11 Ways To Knock Your Initial Meeting Out Of The Park
INTERVIEW
online
www.insurancenewsnet.com/topics/magazine
44 ‘Start Your Engine’ And Rev Up To Hit Your Goals
30 S ituations Change. Solutions Can, Too. By Deborah A. Miner A 1035 exchange may be appropriate to satisfy a client’s changing needs, but there are factors to keep in mind.
By Sarano Kelley An energized beginning and an ability to prioritize activities will give you the momentum needed to meet your goals.
INSURANCENEWSNET.COM, INC.
275 Grandview Ave., Suite 100, Camp Hill, PA 17011 717.441.9357 www.InsuranceNewsNet.com PUBLISHER MANAGING EDITOR SENIOR EDITOR VP SALES SENIOR MARKETING DIRECTOR MANAGER/ACCOUNTANT
Paul Feldman Susan Rupe John Hilton Susan Chieca Melissa Clark Jen Wingard
CREATIVE DIRECTOR GRAPHIC DESIGNER COPYWRITER DIGITAL CAMPAIGN MANAGER MARKETING PROJECT MANAGER TRAFFIC COORDINATOR
Jacob Haas Shawn McMillion Ash Emrich Megan Kofmehl Kelly Cherrup Sorayah Talarek
MEDIA OPERATIONS MANAGER NATIONAL ACCOUNT DIRECTOR NATIONAL ACCOUNT DIRECTOR NATIONAL ACCOUNT DIRECTOR NATIONAL ACCOUNT DIRECTOR DATABASE ADMINISTRATOR
Ashley McHugh Sarah Allewelt Brian Henderson Dominic Colardo Mark Ciszak Sapana Shah
Copyright 2022 InsuranceNewsNet.com. All rights reserved. Reproduction or use without permission of editorial or graphic content in any manner is strictly prohibited. How to Reach Us: You may e-mail editor@ insurancenewsnet.com, send your letter to 275 Grandview Ave., Suite 100, Camp Hill, PA 17011, fax 866.381.8630 or call 717.441.9357. Reprints: Copyright permission can be obtained through InsuranceNewsNet at 717.441.9357, Ext. 125, or reprints@insurancenewsnet.com. Editorial Inquiries: You may e-mail editor@insurancenewsnet.com or call 717.441.9357, ext. 117. Advertising Inquiries: To access InsuranceNewsNet Magazine’s online media kit, go to www.innmediakit.com or call 717.441.9357, Ext. 125, for a sales representative. Postmaster: Send address changes to InsuranceNewsNet Magazine, 275 Grandview Ave., Suite 100, Camp Hill, PA 17011. Please allow four weeks for completion of changes. Legal Disclaimer: This publication contains general financial information. It should not be relied upon as a substitute for professional financial or legal advice. We make every effort to offer accurate information, but errors may occur due to the nature of the subject matter and our interpretation of any laws and regulations involved. We provide this information as is, without warranties of any kind, either express or implied. InsuranceNewsNet shall not be liable regardless of the cause or duration for any errors, inaccuracies, omissions or other defects in, or untimeliness or inauthenticity of, the information published herein. Address Corrections: Update your address at insurancenewsnetmagazine.com.
February 2022 » InsuranceNewsNet Magazine
1
WELCOME LETTER FROM THE EDITOR
Putting The Pieces Together
I
was a middle school student, rummaging through a box of papers, when I first saw the card imprinted with my name and some unfamiliar numbers. “What’s this?” I remember asking my dad. He explained that it was my Social Security card and that someday I would need to show it when I started working my first job. And when I was much older, I would need it when the time came to claim benefits. And that the number on the card would be some kind of identification number when it came to taxes and other financial matters in the future. I began pondering. Social Security? Isn’t that something that Grandpa talks about? Isn’t that something only old people have to worry about? I’m only 13! I have a lot of years ahead of me before I have to think about that stuff! And work? I still have time before I have to get a job. Why do I need to care about this now? Fast-forward a few short years to a time I looked forward to receiving my first paycheck, only to be disappointed when I looked at the amount of the check. Why did they deduct money for something called FICA? Why am I giving up some of my paycheck now when I don’t have to worry about retirement for another 40 or 50 years? Now I log on to the Social Security website regularly to make sure my account information is up to date and to track how much I have accumulated for future benefits. When the day comes that I finally retire, Social Security will play a big role in that retirement. I want to tell younger me that there was a good reason why those early paychecks were smaller than I had anticipated. Millions of Americans depend on Social Security to fund their retirement, to pay survivors’ benefits or to provide disability payments. But claiming those benefits isn’t as straightforward as many people think. Should you claim as soon as you are eligible, or should you wait as long as possible? And what about married couples? A single person only has to consider nine 2
different scenarios when claiming retirement benefits. For married couples, the available options for filing strategies grow to 81. There are no do-overs if you pick the wrong claiming strategy, and the consequences can mean a loss of tens of thousands of dollars over the retirement years. As in many other financial decisions, the difference between success and failure depends on whether someone gets help from a professional. In this issue of InsuranceNewsNet, we look at experts who have devoted their practice to helping clients make the most of their Social Security benefits. Financial professionals who want to provide Social Security advice but aren’t sure whether they are knowledgeable enough to do so have champions in Marc Kiner and Jim Blair. Marc saw the need for giving Social Security advice, but he knew he needed more information than what he was able to find on his own. He met Jim, who had retired after many years with the Social Security
InsuranceNewsNet Magazine » February 2022
Administration, and a business partnership was born. Marc and Jim share how they became the dynamic duo of Social Security advising in an interview with Publisher Paul Feldman. What Marc and Jim — and the other professionals we interviewed this month — most frequently said about Social Security is that it’s not a one-size-fitsall program, and each client’s claiming decision depends on their individual situation. A lot of factors go into the Social Security decision. For many people like me, the day to “think about that stuff” is coming sooner than they realize. They need help from someone who can put their Social Security puzzle in the way that gives them the best picture in retirement. Susan Rupe Managing Editor
Plan for life’s adventures. ANICO STRATEGY INDEXED ANNUITY PLUS 7&10 Help your client choose the best path to achieve their retirement goals with ASIA PLUS 7&10.
Two Lifetime Income Rider Options
Competitive Interest Crediting Strategies
Tax Protection
Lock in a guaranteed 6.85% interest rate on the income base for up to 10 years with the fixed rate Lifetime Income Rider.1
Cater to your client’s specific needs with a variety of crediting strategies and indices to choose from.
Accumulate in the annuity on a tax-deferred basis, interest credited will not be taxed until it is removed from the annuity.
Choose your client’s path. Call 1-888-501-4043 today or visit img.anicoweb.com for more information or to run a quote. 1) Lifetime Income Rider index credit is calculated differently than base contract indexed strategies and does not impact the base contract’s Annuity Value. There are fees for these riders. Any excess withdrawals will decrease the income base and will require the income payment to be recalculated, resulting in lower income payments. A full surrender will terminate the contract and lifetime income rider payments. You may not take a partial or excess withdrawal that would result in an annuity value of $2,000 or less. ASIA PLUS Surrender Charge Schedules: 7 year: 7%, 6%, 5%, 4%, 3%, 2%, 1%, 0%; 10 year: 10%, 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, 0%; California 9 year: 9%, 8%, 7%, 6%, 5%, 4%, 3%, 2%, 1%, 0%. A Market Value Adjustment may apply. Waivers are not available in all states. Form Series FPIA19; LIR19 (Forms may vary by state, Idaho forms ICC19 Form FPIA19 and ICC19 Form LIR19). The contract and riders may not be available in all states. See Policy for details and limitations. American National Insurance Company, Galveston, Texas.
For Agent Use Only; Not for Distribution or Use with Consumers. 888-501-4043 | img.anicoweb.com
IMG22866 | INN 2.2022
INFRONT
COVID-19 Mortality Spike Hits Insurers The pandemic death rates have exceeded even the most conservative projections for some insurers.
third quarter of 2021. The CDC lists COVID-19 as the cause for 50,600 deaths in third quarter 2021.
By John Hilton
Foresters Financial sells a variety of individual life insurance and annuity products. It is a different product mix and a different market than OneAmerica, noted Matt Berman, president of Foresters’ U.S. life insurance division.
T
here was an expectation by life insurers that COVID-19 deaths would decline as vaccination rates increased throughout 2021. That has not happened. In a shocking twist, mortality rose sharply, and many insurers are recalibrating their actuarial projections. “Based upon our analysis of [Centers for Disease Control] national data, there has been a 40% increase in death rates for individuals age 18 to 64 years old across the U.S. when comparing Q3 2021 data to pre-pandemic data from the same period in 2019,” said Jonathan D. Neal, spokesman for OneAmerica. The impact for OneAmerica totals more than $100 million in group life insurance and disability claims for 2020 and 2021, Neal added — roughly $35 million and $80 million, respectively. “We’re seeing right now the highest death rates we have ever seen in the history of this business,” J. Scott Davison, the CEO of OneAmerica, said during an online event last month. Life insurers projected higher losses from the COVID-19 pandemic but were caught off guard by the latest mortality data. Nearly everyone was. In April 2021, Fitch Ratings wrote that it “expects pandemic-related mortality claims to decline in 2021 due to the global rollout of vaccines. This assumes that virus variants will not diminish the effectiveness of the vaccines.” As of press deadline, the U.S. had recorded more than 832,000 deaths attributed to COVID-19. Centers for Disease Control data shows overall deaths spiking to 145% of 2019 levels during the 4
Not As Much Impact
those promises.” The obvious major difference from group life insurance offered by OneAmerica and individual life insurance is in the underwriting, Berman explained. Foresters is usually including blood and fluid testing in its underwriting. “We also underwrite business on the nonmedical basis, and that means that we're not utilizing blood and fluid from the individual applicant,” Berman said. “We're using other databases, and we price for that presumed mortality slippage.” One of the things life insurers are doing in the age of COVID-19 is sharpening the underwriting process to better identify risk. While insurers are not requiring or asking about vaccination status, they have added other questions to the application process. “The questions we inserted at the outset
US CDC Deaths — Age 18 to 64 2020 and 2021 as a % of 2019 180% 160% 140%
145% 129%
121%
120% 100%
107%
125%
126%
127%
Q3
Q4
80% 60% Q1
Q2 2019
2020
2021
SOURCE: OneAmerica graphic representing reported data of US death rates (age 18-64) as provided by the CDC.
While acknowledging that a 40% mortality increase is “stunning,” Berman reported a different picture at Forresters. “We’re not experiencing that type of mortality,” he said, declining to divulge specific numbers. “But I will say that we have certainly experienced an uptick in mortality.” The data is certainly concerning in the bigger picture, Berman added. “I’m always concerned about the business we underwrite,” he said. “We are a long-term financial services operation. We underwrite promises today, and we have to be certain that we're alive and thriving years from now to deliver on
InsuranceNewsNet Magazine » February 2022
of the pandemic, we asked, ‘Are you currently experiencing any flu-like symptoms at the moment?’” Berman noted. “We asked about travel. They were questions that were trying to appropriately underwrite the risk.” InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john. hilton@innfeedback.com. Follow him on Twitter @INNJohnH.
THE NEWS YOU NEED, RIGHT IN FRONT INFRONT
Health Insurers Ponder ‘No Surprises’ Impact What’s next for a law to ban most unexpected medical bills. By Doug Bailey
A
law to ban unexpected medical bills that took effect on New Year’s Day sounds simple enough. But like many things out of Congress, the details are complicated. There are questions about how the “No Surprises Act” will be calculated and enforced, and there already have been several lawsuits filed seeking to change or eliminate elements of the complex legislation. Surprise medical bills have become so common, according to studies, it’s a wonder anyone is really shocked these days. The Kaiser Family Foundation says surprise medical bills number in the millions each year, and two in three adults say they fear unexpected charges when they obtain medical treatment. The surprise bills typically occur when a patient seeks emergency treatment and has to rely on out-of-network providers that they did not choose. A Department of Health and Human Services report said patients can get clobbered with more than $1,200 in average unexpected charges for anesthesiologists, $2,600 for surgical assistants and $750 for birthing charges. But anecdotal stories abound about people getting tagged with unexpected emergency services totaling tens of thousands of dollars that they never saw coming. The new law aims to end such incidents. In what has been called one of the biggest consumer protections ever passed by Congress, when a patient receives emergency care or scheduled treatment from physicians and hospitals outside their insurance networks, they can only be charged for the in-network costs. The new rule applies to employer-based private health plans and to individual policies bought through the Affordable Care
Act exchanges. Medicare and Medicaid already ban such charges. The law covers most hospital, urgent care, free-standing emergency departments and air ambulance services. But perhaps most notable, the law does not cover ground ambulances, which frequently are a source of surprise charges. The law also covers nonemergency care in some situations, such as when an out-of-network anesthesiologist, surgeon or radiologist is ordered by in-network physicians. In those cases, consumers would be responsible only for their in-network deductibles, coinsurance or copays. Should a patient choose care from an out-of-network source, the provider would have to give estimates of the charges at least 72 hours in advance, and the patient would have to pre-consent to the higher out-ofnetwork costs.
CBO: Insurance Premium Cut
The Congressional Budget Office says the new law will cut insurance premiums by anywhere from 0.5% to 1%. But who pays the balance of the charges and how the costs are calculated were the biggest sticking points to the law’s passage. And they remain controversial. The insurance industry lobbied to calculate payments on locally negotiated rates, arguing that surprise billing has exploded recently as private equity firms overtook physician groups and hospitals merged
and consolidated services. Providers and networks, however, called for negotiated prices or mediation, contending that fixed prices would lead to federal rate setting and take away incentives for insurers to contract for services. The final law employs a system in which insurers and providers negotiate and turn to independent arbiters if they cannot resolve their differences. The American Hospital Association and the American Medical Association have gone to court challenging the interpretation of the balance payments, saying they unfairly benefit the insurers. The associations said the process will reduce access to care by discouraging meaningful contracting negotiations, reducing provider networks, and encouraging unsustainable compensation for teaching hospitals, physician practices and other providers. “If regulators don’t follow the letter of the law, patient access to care could be jeopardized as ongoing health plan manipulation creates an unsustainable situation for physicians,” said AMA president Gerald E. Harmon. Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.
February 2022 » InsuranceNewsNet Magazine
5
Sponsored Content
Help Your Clients Protect Their Social Security Benefits PlanGap is pioneering ways to empower advisors to solve the largest unaddressed fear in retirement planning.
D
wonderful solutions to address concerns avid Duley, Founder and CEO about outliving savings and leaving a of PlanGap, knows firsthand legacy. Two decades ago, the industry the feelings of frustration and began adopting long term care solutions helplessness that result when broken promises destabilize a family’s financial well-being. Growing up in Flint, Michigan, David experienced the devastating effects of General Motors declaring bankruptcy, closing their factories, and laying off 90% of their workforce. Today—with the Social Security Administration warning that by 2033 they’ll only be able to pay 76% of promised benefits, and independent research consistently finding that Americans’ #1 concern in retirement planning is that their promised Social Security may be cut—David is on a mission to ensure that, unlike the families in Flint, retirees and pre-retirees David Duley, founder and CEO of PlanGap have the solutions and information they need to take control of their financial success in retirement. that address health impairment In this Q&A, David not only shares more concerns. PlanGap is bringing the next on the solutions PlanGap is building, generation of living benefits to the life but also, as an exclusive debut for INN and annuity market to further address readers, he introduces a new powerful the top remaining concern in retirement diagnostic platform that will drive planning: the fear that Social Security conversations and lead generation in will not be able to pay retirement income 2022 and into the future. in its full and promised amount. We are laying the foundation so our industry can Q: To start, what does PlanGap do? be the first to lead with a solution. A: I’ll begin with the big picture. Study after study finds that there are four Q: What goes into laying that major concerns in retirement planning: foundation? Will I outlive my savings?, Will my Social A: I look at it as three different but Security be reduced?, Will I have a health complementary lines of work. First, we impairment?, Will I be able to leave a develop life and annuity products that legacy to my children and grandchildren? offer the industry’s first triggered benefit Annuities and life insurance have been
if your income from Social Security is reduced by a government mandated rule change. PlanGap made insurance history by launching the benefit as part of a fiveyear multi-year guaranteed annuity (MYGA) in 2020. Then, in 4th quarter of 2021, we announced an exciting partnership with North American, an A+ carrier, and Annexus, the premier designer and distributor of retirement solutions. Together, we introduced a highly competitive fixed index annuity (FIA) that features PlanGap’s proprietary Social Security Protection. Second, we partner with the best distribution groups to bring these solutions to the market. Third, we’re building tools for our carrier, distribution and agent partners that empower them with resources to educate their clients about the financial challenges facing Social Security and how to prepare for the possibility of reductions to their Social Security income. Q: Congratulations, it’s wonderful to see that kind of innovation happening in a life and annuity industry that can be, how do I put it, stale? A: [Laughs] Thank you. What I’m most proud of is that we’ve been able to bring captains of the insurance and finance industry to the table to begin tackling this enormous gap in retirement planning. Milliman has been an integral part of our product development process. Annexus and Ash Brokerage have been tremendous partners and early adopters in helping us introduce PlanGap Social
Sponsored Content Security Protection to advisors. Then, there’s the entrepreneurial carriers, American Life and North American, that we worked with to develop our first products. Together, we’re bringing solutions to the market to help clients worry less about the “what-ifs” when it comes to their Social Security income in retirement. That’s why I’m excited to debut today with your readers our latest tool and that’s the PlanGap Social Security Risk Score. Q: A score, meaning I could see how at risk my Social Security income is? A: Exactly. The government is warning that by 2033 they’ll only be able to pay 76% of promised Social Security income, so mathematically they are going to have to change the rules. One potential fix would be to start means-testing Social Security and as a result high-earners would see their income from Social Security reduced. It would be similar to how if your income was over a certain level, you didn’t get the COVID stimulus checks. I’ve talked with advisors who immediately dismiss that their clients are at risk of reductions, but when I bring up means-testing, many agree that could happen to their clients. Advisors need to change their thinking and accept that due to the shifts in political power, there is real risk to their clients. Until today, if a client asked their advisor how susceptible they are to reductions in Social Security income and how at risk their retirement plan is to a reduction in Social Security income, that advisor would have no answer tailored to that individual’s situation. Today, that changes. For the first time ever, PlanGap is providing a tool that empowers advisors to help their clients manage
their unique risks. It’s a gamechanger. Q: Explain more why it is a gamechanger. A: The advisors I talk to are passionate about helping their clients plan for the future so that they can be successful on their own terms. However, the ways that the government may decide to change Social Security’s rules is outside their clients’ control. The narrative that politicians will act in the best interest of the Baby Boomers is becoming obsolete.
and you see scenarios where an advisor showcases a 95% chance of the plan succeeding, and then you model in a 24% cut to Social Security in 2033, and suddenly that plan’s chance of success is less than 50% — essentially, a coin flip. Q: A coin flip? That’s alarming! A: We need to give people a way to protect their promised Social Security income so that their retirement peace of mind is not used as a political football. Q: So, the PlanGap Social Security Risk Score is personalized? A: Everyone reading this can see for themselves. Take the quiz to see your own PlanGap Social Security Risk Score. You’ll see how your score is calculated based on your personal situation and the risk factors unique to you.
Politicians vote in line with their largest and most powerful constituencies, and more and more those are the younger generations. Advisors need to consider the significance of what a reduction in Social Security would mean to their clients’ retirement plans. For a twoearner household in good health and who had above median income in their working years, Social Security is promising to potentially provide over $1.5 million in income. In this interest rate environment, you’d have to write a serious check to purchase an annuity that generates that kind of income. So, we think it’s important that agents educate their clients on just how big of an “asset” Social Security really is. People want to protect their largest “assets”—think home insurance, car insurance, health insurance. You look at some retirement planning software,
Q: I’ve really enjoyed our conversation, but I’m anxious to wrap this up and see how at risk my Social Security income may be. A: Look, you’re not alone in being concerned your promised Social Security income may be at risk. It is a massive unknown lurking over all our retirement plans. It’s what makes the PlanGap Social Security Risk Score so powerful. Advisors can access it to educate and attract the millions of retirees and pre-retirees that are looking for answers and solutions that help them gain control. This will be the most effective tool for lead generation and retirement planning in the year 2022 and beyond. Start using it for free today, and what you’ll find is that by offering clients a way to assess their risk and protect their hard-earned Social Security income, you’ll stand out from the competition and your practice will grow.
Go to RiskScoreAdvisor.com TODAY. Get your FREE score and see how it will revolutionize how you do business.
INTERVIEW
What you don’t know about Social Security planning could cost clients a fortune. An interview with Publisher Paul Feldman
8
InsuranceNewsNet Magazine » February 2022
THE DYNAMIC DUO OF SOCIAL SECURITY PLANNING — WITH MARC KINER AND JIM BLAIR INTERVIEW
S
ocial Security. It’s something nearly every client will rely on for retirement income. But claiming Social Security can be complicated, and if done incorrectly, it can cost a client thousands of dollars at a time they need money most. After 35 years of experience in public accounting, Marc Kiner realized that his clients needed help making Social Security decisions. But he needed to be educated on the topic himself, and he realized advisors needed to be educated on Social Security as well. Kiner teamed up with Jim Blair, who was no stranger to Social Security. Blair had decades of experience working for the Social Security Administration, and he knew his way around the system. The two of them are partners in Premier Social Security Consulting in Cincinnati, where they offer Social Security consulting to clients as well as advisors. Seeing the need for advisors to learn more about Social Security, they began the National Social Security Advisor certificate program, giving advisors a tool to increase their value to clients.
answers, so I thought I would offer Social Security consulting services in my accounting practice. I read two or three books cover to cover back in 2008, but I ended up with more questions than answers. So I knew I couldn’t provide this service. One day, I was in a local restaurant, and an attorney whom I had known for about 10 years walked in. I went up to him and asked him whether he knew anyone who could educate me about Social Security. He told me his uncle worked for the Social Security Administration and was going to retire in a few months. His uncle ended up being my partner, Jim Blair. I talked to Jim in 2009 and gave him my grand vision of where this company would go if he joined up with me, and he flatly turned me down. JIM BLAIR: It’s true. I had planned on retiring and going fishing. But I learned about Social Security because I listened to my mom. She said, “You should get a job with the government.” I got a job with the Social Security Administration as a service representative in Marion, Ohio. I was one of the folks who help people who have already started
materials. We don’t sell investments or insurance. I don’t do taxes or accounting. We just focus on Social Security, pure and simple. FELDMAN: What are some changes with Social Security that every advisor should know? BLAIR: The Social Security program doesn’t change a whole lot. But there are always changes because of people getting older and the way Social Security computes benefits. The cost of living increase is that kind of thing. What people need to understand is just because you’re 62 years old doesn’t mean it’s time to apply for benefits. Everybody’s situation is different. I coined the term “situational Social Security.” That’s because so many factors will play into someone’s claiming decision. Now you know there’s an eight-year window in which everyone decides when to start their benefits — up to age 70. Regardless of your full retirement age, you’re going to start — or you should start — retirement in that eight-year window. Why would you start taking benefits at
What people need to understand is just because you’re 62 years old doesn’t mean it’s time to apply for benefits. Everybody’s situation is different. — Jim Blair Social Security is not a one-size-fits-all program, and each client’s claiming decision depends on their individual situation. In this interview with InsuranceNewsNet Publisher Paul Feldman, Kiner and Blair clear up some of the misconceptions about Social Security and discuss what inspires them to provide advice in this arena. PAUL FELDMAN: You created one of the few Social Security planning certification programs. How did you both find yourself doing this? MARC KINER: I earned my CPA license back in 1980. As time went on, I was getting more questions about Social Security from my clients. I did not know who to go to for
claiming Social Security. I helped people with retirement, survivor benefits and disability benefits. Eventually I ended up being a district manager, and I spent a total of about 35 years working for Social Security.
62? Why would anybody wait until 70? Or anywhere in between? There are a lot of factors that go into that decision. And that’s one of the things that we like to go over with our advisors.
KINER: When Jim and I got together, our focus was to help folks across the country to understand and maximize their benefits. In 2013, we evolved into an education company when we created the first Social Security certificate program, called National Social Security Advisor. After a day of intense training, the advisor takes an assessment. After they pass the assessment, they are awarded the NSSA certificate, and they can indicate that they are a certificate holder on their marketing
FELDMAN: Can you tell us about what’s happening with Social Security? What is being proposed for Social Security? BLAIR: It seems as though there is something proposed for Social Security every year but Congress never acts on it. I think one thing we’ll eventually see is a gradual raising of the full retirement age. Right now, full retirement age caps out at age 67. For someone born in 1960 or later, full retirement age is 67. It’s a pretty good
February 2022 » InsuranceNewsNet Magazine
9
INTERVIEW THE DYNAMIC DUO OF SOCIAL SECURITY PLANNING — WITH MARC KINER AND JIM BLAIR bet that it eventually will go up to age 70. We don’t know when, and it won’t be overnight. But certainly, people in their 20s, 30s, maybe early 40s can expect to see full retirement age go to if not 70 then some point close to 70. There are other proposals regarding the benefit amount. Currently, what you pay into the Social Security benefit is capped — at least for the Social Security part, not for Medicare — this year at $143,800. Next year, it’s $147,000. They need to increase it, and they’re looking at a couple of different ways to do it — maybe increasing it by about $100,000 to around $250,000. There’s also some talk that we would still cap it at $147,000. But then, if you earned more than $400,000, it would kick back in again. To keep those higher-earning individuals from getting an even higher benefit, they’ll probably means test it. That scares a lot of people, means testing. People want to know, what does that mean? Does that mean if my income is more than $100,000, I don’t keep my Social Security? It looks like they’re going to change how benefits are computed. For example, if they look at 2022 as a year in the calculation, instead of the $250,000 that maybe you would pay, they only cap it at $147,000. So there will be people paying a tax on the higher benefit that’s not included in the calculation. Those are the things I guess will probably happen. And just about every proposal is out there. We’ve seen a few others, maybe raising the initial age for claiming benefits from 62 to 64. Delayed retirement credit — I think most people know that if you delay at full retirement age, you earn an 8% a year increase. You stop earning that at age 70. If they raise the full retirement age to age 70, you can’t earn delayed retirement credits. They go away. Are they just going to be gone? Are they going to raise them at age 72 or 74? And who wants to wait until age 74 to draw benefits? 10
Those are the kinds of changes we definitely are looking at. KINER: Let’s also mention the restricted application being phased out. In 2023, the opportunity to claim off your spouse’s record, leaving your benefits to grow or earn delayed retirement credits, that goes away. So folks born by that magic birthdate of Jan. 1, 1954, can still file that restricted app. But by the end of 2023, it’s gone. Restricted application is a strategy whereby you file for benefits off your spouse, while at the same time you get to grow any delayed retirement credits. Let’s say I can get $2,000 a month off my work
for those clients who are born before that date, the restricted application is definitely something to consider. FELDMAN: What do you think people are most shocked to learn when they start planning for Social Security? KINER: It’s the number of options they have. It’s not one size fits all. You don’t just rush on to Social Security when you hit age 62. To file, you definitely need to consider your options. Clients are shocked when we tell them benefits are based on 35 years of indexed earnings. Who knows what their indexed earnings
Clients are shocked when we tell them benefits are based on 35 years of indexed earnings. Who knows what their indexed earnings are? Nobody with any degree of reasonableness will know what their indexed earnings are. — Marc Kiner
record. But I can also get $1,000 off my wife’s record because she worked. I could follow restricted application and at my full retirement age, get $1,000 a month off my spouse. And when I turned my benefits on at age 70, now my benefits have grown by 32%, up to $2,640 a month. So I’ve collected a total spousal benefit of $48,000, and I have 32% more in delayed retirement credits. But you have to have been born by Jan. 1, 1954, to be able to take advantage of that strategy. So the number of people eligible to do this is steadily dwindling. But
InsuranceNewsNet Magazine » February 2022
are? Nobody with any degree of reasonableness will know what their indexed earnings are. BLAIR: People are not aware of the 35 years. They think it’s maybe five years of earnings or the last years of earnings. They don’t understand that once those earnings are indexed, it does bring them closer to their current earnings. They think, I’ll just earn a whole bunch more money toward the end, maybe the last five years, I’ll increase my Social Security
THE DYNAMIC DUO OF SOCIAL SECURITY PLANNING — WITH MARC KINER AND JIM BLAIR INTERVIEW benefit, but it doesn’t work that way. But they’re surprised that their current work doesn’t make that much of a difference in the amount of money that they’re going to receive overall. Another thing that people don’t think about is the effect of taking benefits on a
benefit available, then you allow for that additional amount. But you’re always looking at your own benefit first. Social Security is going to pay you first based on your own benefit. If you apply on your own and your spouse is receiving benefits, they’ll pay you on your own benefit now. So
$100,000, $125,000. So if someone continues to work and makes $100,000 per year in FICA wages while receiving a benefit, they’ll pay tax on $6,200 of those wages, and probably not see any increase in their Social Security benefits. Because $100,000 earned in 2022 is not more than the lowest
Many times, you’ll have couples where between the two of them, their Social Security income is fine. Then one of them will die. And your bills don’t magically get cut in half when that happens. — Jim Blair survivor benefit. Many times, you’ll have couples where between the two of them, their Social Security income is fine. Then one of them will die. And your bills don’t magically get cut in half when that happens. But you lose their Social Security. And that surprises a lot of people because they don’t think about what the effect will be. It depends on how important survivor benefits fit in with the client’s estate plan. KINER: People also don’t think about the fact that Social Security is ill prepared to provide advice to you. So if you go down to the Social Security office and you start to throw out some ideas, they can’t help you. It’s not their job to help you. It’s their job to take the application for you, but not to provide you guidance and advice. FELDMAN: What do you think that advisors don’t know about Social Security but should? KINER: Lack of information on how divorced spouses can claim benefits from an ex-spouse’s record. Advisors don’t understand this. The spouses had to have been married for at least 10 years, and they don’t understand that for an ex-wife to collect from her ex-husband, he needs to be receiving a benefit unless they have been divorced for at least two years. And advisors don’t understand that someone can file a restricted application claim off the work record of an ex-spouse while their own benefits grow or delay retirement credits. BLAIR: Most people aren’t aware exactly how spousal benefits work. You must take your own benefit first. If there is a spousal
people don’t understand how that spousal benefit is calculated. FELDMAN: What question are you asked most frequently? KINER: We get asked a lot of questions about cost-of-living adjustments. We also get asked a lot about the annual earnings test. If you begin receiving benefits prior to reaching full retirement age, there’s a limit as to how much you can receive in earned income each year before Social Security withholds all or part of your benefits. BLAIR: We get asked questions about people who are eligible for a pension from their work but they didn’t pay into Social Security. In most states, that covers people who work in government, police, public school teachers. People ask what effect that has on their Social Security benefit. And people need to go online and look at their Social Security benefit statements. They used to mail them out to everyone but stopped doing that a few years ago. It’s a great planning tool, but you also need to make sure your information is correct, that they have your correct name and date of birth, that they are posting your wages for every year, and that they are correct. KINER: Another common question we get is whether someone’s benefits increase if they continue to work after receiving Social Security benefits. And the answer is it kind of depends. Now we look at someone’s benefits based on their highest 35 years of indexed earning. So for the person who made $40,000 in 1985, their indexed amount on those earnings should be about
year of index earnings used in the 35-year calculation. So an advisor will tell their client, yes, benefits will go up because you pay more FICA taxes. But the truth is that benefits are not going to go up. So the advisor will have a very disappointed and upset client, knowing after they find out they paid all of this FICA tax but their benefits did not go up. FELDMAN: What strategies should an advisor use to be successful in Social Security planning? KINER: You need education, and you need a software tool. My advice is to take time to learn about Social Security. This will help you to attract and connect with baby boomers as clients. Social Security is not really a complicated program. But you need to be educated. And it’s difficult to learn Social Security from a book. There are different facets to Social Security benefits. Attending a class is very important and goes a long way toward understanding the Social Security program. And then, just have patience and learn and read. The last thing we want an advisor to say is, “Hey, Mr. or Mrs. Client, just go down to the Social Security office. They’ll tell you how to claim benefits.” It doesn’t work that way. Advisors need to be educated to understand situational Social Security. They need be ready to talk to their clients and prospects. They need to be ready to bring up the discussion about Social Security. If they’re not, their clients will be the ones on the losing end.
February 2022 » InsuranceNewsNet Magazine
11
the Fıeld
A Visit With Agents of Change
NOT YOUR FATHER’S
Financial Advisor JESSICA WEAVER describes how she forged her own path in financial services while sharing the secrets of how she became a self-proclaimed ‘Money Queen.’
BY SUSAN RUPE
12
InsuranceNewsNet Magazine » February 2022
J
NOT YOUR FATHER’S FINANCIAL ADVISOR — WITH JESSICA WEAVER IN THE FIELD
essica Weaver understands that money has an emotional pull on many people, especially women. For her, that emotional pull went back to childhood, when she kept a stash of cash inside a bin in her closet. “It was my earliest childhood memory, how if I was mad about something and locked myself in my room, my parents would threaten to come in there and take my money if I wouldn’t come out,” she said. “They knew how I was about that money. I had no idea how much that fear of money being taken from me led me into the life of being a financial advisor.” Today, Weaver, of Chester, N.J., is a wealth advisor and the founder of the Women’s Wealth Boutique. She is the author of the books Confessions Of A Money Queen, Time To Refine and Strong Woman, Stronger Assets. She recalled her fears that “if I don’t work hard and if I’m not good, my money is not good either, for money can easily be taken from me no matter how hard I work.” Early in her life, she witnessed both of her grandmothers struggle with retirement and run out of money. Later, as an advisor, she vowed to take a stand against this happening to any other woman. So in 2015, she began running workshops and events to help women gain control over their money before it was too late. Now she wants to help women overcome their fears about money and replace those fears with a feeling of serenity. “What I try to instill is that money is a practice,” she said. “The evolution of our journey with money and how we use it as a tool in our lives is ongoing. And there’s not a wrong way to deal with money. It should be about how you use money to live out your life purpose in the best way possible.”
Attracted By Strategy
Weaver grew up in the financial services industry. Her father has been in the insurance business for about 40 years, and Weaver said she remembers sitting in the living room with him, stuffing “cold mailers” into envelopes when she was 8 or 9 years old. “And then I remember spending my summers working in his office, filing and stuffing envelopes,” she said.
While she was a student at Moravian College in Bethlehem, Pa., she decided to begin working for her father after graduation. Her brother already had begun working for her father as well. She obtained her first license the summer before her senior year of college.
Weaver described her father as a more traditional, life insurance-oriented advisor. But she was more interested in the financial advising side of the business. “I think the strategy and the planning behind how money can grow for people really drew me into the business,” she said. “I played basketball through college, so anything involving strategy was right up my alley.” While conducting workshops aimed at helping women understand their finances, Weaver realized how many women need guidance in making their money work for them. She started a blog, “Not Your Father’s Advisor.” “Women need the support of women, not their dad’s advisor,” she said. In 2018, she founded the Strong Retirement Club. “It was about helping women to get a grasp on that second stage of their lives,” she said. “So often, when we’re building our careers or our businesses, we’re all focused on working and saving money. But I saw my clients begin their retirement, and all of a sudden, they ask themselves, ‘What is my purpose in life? How can I figure out the lifestyle for retirement?’ Because obviously we can’t plan the financial pieces of retirement if we don’t know how you’re going to live, whether you will move to a place with a different cost of living. “We need all of that to be clear in order to make a strong, reliable financial plan. And then we have to build in planning for health care, because without our health, our money means nothing. We also discuss all the things they had been putting off because they were working so hard all these years. Now they have the time to do it, and we get them to the financial means to do it.” Weaver said the Strong Retirement Club also looks at long-term care and its related issues. “What are the logistics of long-term care and not just funding it? We help women consider things like finding the right place, finding the right help. Who’s going to move you there? Who’s going to pay your bills? Who’s going to sell your house?” Weaver formed another group, the Money Empire Club, in 2019. That group is focused on women building their wealth, and on helping them obtain the confidence and financial position for a stress-free retirement. “These are women who are building
February 2022 » InsuranceNewsNet Magazine
13
the Fıeld
A Visit With Agents of Change
The #Pinkfix Community Values Sidebar
• Educate women above all else!
• Support other female business owners. • God first, family second, community third ... that’s just how we roll! •A lways show women our excitement, love, and gratitude for working with them. •H elp women live their best lives by committing to their goals with them. • Embrace innovation! • Be compassionate because we don’t know where someone else is coming from. Never judge. • Maintain vision and integrity with every opportunity.
The #Pinkfix
Culture
•T here is always a #pinkfix behind any dark cloud, bumpy road, or tough time. •A lways celebrate the women in our community, their successes, and our anniversaries together. •S tart each event by popping a cork! •C ommunity, confidence, control. •M aintain passion, fun, and excitement with each task. •C ommunity of safety and trust.
14
InsuranceNewsNet Magazine » February 2022
their businesses, or maybe they are working but they want a side hustle, or they want to get into real estate — they want to build up their wealth,” she said. “The whole idea is how can we embrace this work-optional lifestyle sooner than retirement. I wanted to take the idea of retirement and make it visible for younger women or for someone like me, a working mom of two young kids. I can’t work 80, 100 hours a week. So how do we work smarter?” The Money Empire Club attracts not only women who are business owners but also women who are thinking about moving out of their current jobs and becoming self-employed. “They’re thinking ahead and creating their reinvestment fund,” Weaver said. “It’s that bucket of money that they would build, knowing that in five or 10 years they will want to reinvent themselves — they will want to get out of the corporate world or go back to school or start something new.”
The #pinkfix Movement
Weaver’s passion for helping women improve their financial lives led her to found the #pinkfix movement. She described #pinkfix as “a celebration of women and their wealth.” She said that #pinkfix is a community of women to help other women build their careers and businesses, and build prosperity along the way. Through #pinkfix, she helps women “channel their inner wealthy woman and shift into becoming a significant player in the game of money.” Weaver said she wants #pinkfix to “help women find their truth, to uncover what ignites them and how to monetize their voice.” Her website and book covers show her wearing a variety of bright pink outfits and surrounded by pink objects, many of which are given to her by friends and members of the #pinkfix community. “I think the most unusual item I received was a pink coffeemaker,” she said. “And I get pink lip glosses all the time, pink wine glasses and coffee mugs.” A lifelong Catholic, Weaver loves to bring God, meditations and prayers into the #pinkfix movement’s events and
NOT YOUR FATHER’S FINANCIAL ADVISOR — WITH JESSICA WEAVER IN THE FIELD
programs. Her latest book, Confessions of a Money Queen, weaves her religious beliefs into her beliefs about money. The book lists 10 money moves that are intertwined with thoughts on faith and gratitude. “When I wrote the book, I was on a spiritual journey, finding my relationship with God,” she said. “In reading the Bible, I saw so much of it was around money. The more I brought this to my work, the more peace I felt. And the more peace I felt, the more I wanted to schedule more time for God and the more I wanted to bring God into my work.”
A Different Path
Weaver worked with her father and brother for about 10 years and said that although she enjoyed being in the business with them, she believed she needed to take a different path. She formed the Women’s Wealth Boutique at the end of 2021 and plans to create an all-woman firm to serve the needs of female clients. She works with women in all stages of their lives, but she said they have many things in common. “I work with a lot of women who are independent or they just lost their spouse or were blindsided by a divorce,” she said. “So they all want to achieve financial independence and understand how to build wealth, how investments work, about passive income or real estate. “We take the time to educate clients in a safe environment and in a social environment as well. I bring in speakers on various nonfinancial topics, such as improving your health. I want to help women get to a place of serenity with their money. It’s not so much about building millions of dollars; it’s about finding a way to be at peace because you’re confident in what you’re doing with your money.” Outside of work, Weaver enjoys reading and long-distance running. She also loves to cook for her husband and two young children. Weaver is instilling her passion for helping women learn all they can about money in her daughter, who is four years old. “I’m trying to make her aware of money and what we use it for,” she said. “For example, I’ll ask her, ‘If you had 10 dollars, what would you buy?’ and then we would discuss that. Or we’ll be out riding
Own Your
Moment
Make time each day to understand what you are feeling and reflect on the activities you are doing to move you forward. Journaling is another way to become more present. Here are some questions to help you get the juices flowing. In the morning, journal on these questions: 1. What is one thing you are looking forward to today? 2. What is one thing you are thankful for? 3. What is one thing you are working on right now? 4. What do you need to remind yourself of? In the evening, you can end your day with these questions: 1. What do you want to remember about today? 2. How did I do today? (Give yourself some credit, go easy on yourself and be honest!) Jessica Weaver. Confessions of a Money Queen Bookmark Publishing House, 2021
or walking and pass all these houses and I would ask her, ‘Which house do you like? How much do you think it costs?’ Children don’t always see bills and coins because so many of our transactions are done online. So I think it’s good for her to see money actually being spent. For example, we donate to our church online, but when we’re there, we give her bills to put in the collection basket. So she can see money and that we give back. And I talk to her about my going to work — that I work so that we can have this house, so that she can go to dance class.” Weaver said one of her goals in working with women is to remove the guilt associated with money. “This is especially true of women — we feel so guilty about money. We feel guilty when we’re spending it, we feel guilty
when we’re saving too much. There’s guilt around not earning enough, about not working enough. I want to strip out that guilt that it needs to be done in a certain way. Money is a practice; it’s a tool in our lives. And there’s not a right or a wrong way to use it. “It should be about you and how you live out your life’s purpose in the best way possible.” Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents’ association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.
February 2022 » InsuranceNewsNet Magazine
15
NEWSWIRES
QUOTABLE
Interest Rate Hike Could Come Soon
Next month, the Federal Reserve could enact its first interest rate increase in three years. At its March meeting, the Fed is expected to announce it will bring its benchmark overnight rate up to a range of 0.25%-0.5%. At their December meeting, Fed officials suggested they would enact two additional 25-basis-point hikes before the end of 2022. A basis point is equal to one one-hundredth of 1 percentage point. The Fed is hiking rates in response to inflation pressures that are running by some measures at the fastest rate in nearly 40 years. As officials prepare for a return to more conventional monetary policy, Wall Street is watching closely. Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said she thinks market turbulence will be more pronounced even as the economy grows. Markets are coming off a prolonged period of “a long decline in real interest rates, which allowed stocks to break free from economic fundamentals and their price/earnings multiples to expand,” Shalett said in a report for clients.
UNEASE OVER PANDEMIC, ECONOMY ON THE RISE
Concern About COVID-19 and the Economy
Source: LIMRA
DID YOU
?
16
— Jack Kleinhenz, National Retail Federation’s chief economist
holding on to improved wages that increase consumer spending power in 2022.
» Being able to save money for an emer-
Fewer than two in five Americans say their lives are mostly back to what they were pre-pandemic. LIMRA’s Consumer Sentiment Study showed Americans’ unease about the pandemic and the economy increased since April 2021. Consumers are also concerned about their household finances, with 32% of adults saying they are highly stressed over them, up from 25% in April 2021. According to the 2021 Insurance Barometer Study conducted by LIMRA and Life Happens, overall financial concern rose 20% over the past two years, including a 4% rise in 2021. The study revealed the top four financial concerns are: » Having enough money for a comfortable retirement (43%).
KNOW
Each successive [COVID19] variant has slowed down the economy but the degree of slowdown has been less.
gency fund (37%). » Being able to support themselves if they are unable to work due to a disabling illness or disability (37%). » Paying for long-term care services if they become unable to take care of themselves (37%).
FORMER US TREASURER ‘OPTIMISTIC’ ON 2022
Former U.S. Treasurer Rosie Rios sees brighter days ahead for the U.S. economy. In an interview with CNBC, Rios, who Former U.S. served in the Obama Treasurer Rosie Rios administration, said, “I’m much more optimistic about 2022 than I was about 2021.” Despite that optimism, Rios acknowledged continued uncertainty around COVID-19 could always throw the country’s economy off course yet again. Rios said, “There’s definitely a balance and a rebalance that’s going to have to happen moving forward” when it comes to controlling inflation but
SMALL-BUSINESS STARTS BOOM AMID THE GREAT RESIGNATION
People are quitting their jobs to become their own bosses. From January through November 2021, just under 5 million new businesses were launched, a jump of 55% over the same period in 2019, according to the U.S. Census Bureau. Frank LaMonaca, a certified mentor at SCORE, a program that offers executive mentoring for entrepreneurs, said the pandemic opened an unexpected “window of opportunity” for people hungry to go into business for themselves. “What it did give them was the time to reassess the future of work in their life,” he said. The current startup surge is also a tremendous benefit for some of the many workers who took advantage of the disruption the pandemic generated to take the next steps in their career paths. The growth in remote work opportunities also opened new doors for would-be entrepreneurs.
The Fed raised its projections for U.S. gross domestic product growth in 2022, from 3.8% to 4%. Source: LIMRA
Source: National Association for Business Economics
InsuranceNewsNet Magazine » February 2022
Source: CNBC
orm. One Platform. in. One Login.
nnuity All of your life business. insurance & annuity business.
ommissions, Manage applications, commissions, more. annual reviews & more. e. All in one place.
m
RE Q U E ST A D E M O AT:
ReinventingTheIMO.com
COVER STORY
A Social
18
InsuranceNewsNet Magazine » February 2022
Dile
A SOCIAL DILEMMA COVER STORY
S
mma Social Security faces threats from a variety of sources but remains the central retirement tool for most Americans. Advisors are finding success (and business) becoming experts in Social Security strategies.
By John Hilton
ocial Security is the bedrock of retirement for a large majority of Americans. The question going forward is: Should it be? And, more important, will Social Security remain that transformational senior living benefit when today’s millennials are ready to retire? There are big questions about Social Security and the changes that are happening to it. But advisors say those changing dynamics are more about the evolution of well-rounded retirement strategies to supplement Social Security. Then there are the “so-called” threats to the future of the Social Security program itself. Advisors say it’s a lot of angry talk about a very small problem. A future legislative fix for the long-term funding of Social Security is inevitable, advisors say. That does not mean there aren’t a lot of things happening within the framework of Social Security. Changing rules, new claiming strategies and evolving holistic planning principles are all areas of change affecting Social Security recipients. While Social Security might be taking some hits, advisors say it remains a key pillar of retirement income. “Social Security can be viewed as a form of insurance protecting against longevity, market and inflation risk,” wrote Wade Pfau, a professor of retirement income at The American College of Financial Services. And those risks are all key planning concerns in 2022.
Risky Environment
Advisors already are dealing with clients who are skeptical about the future of Social Security. And this is not a new trend. According to a 2016 survey, only 35% of Americans said that they were “very” or “somewhat” confident that Social Security would pay them at least as much as today’s retirees receive, the Employee Benefit Research Institute found. Thirty percent said they were “not very confident” in Social Security, and 33% said they were “not at all confident” in the program. This confidence shortfall is stark considering how many retirees are reliant on Social Security to live. Half of retired married couples and about 70% of retired singles rely on Social Security for at least half of their income, the Social Security Administration reported. About 21% of married and 45% of unmarried retirees receive at least 90% of their income from the program. Given what is at stake for clients, advisors are sure to receive a lot of questions about Social Security benefits, claiming strategies and future viability this year. Here are three big risks to retirement income generating news headlines. • Inflation. Even good news is not always what it seems when it comes to Social Security. In October, the SSA announced a whopping 5.9% annual cost-of-living adjustment for 2022, the highest benefit increase in four decades. Unfortunately, the rate of inflation stood at 6.8% as of press deadline, based on the November Consumer Price Index. • The stock market. The current bull market treated the worldwide COVID-19 pandemic as a mere speed bump. Market values are racing higher and higher as the already record bull February 2022 » InsuranceNewsNet Magazine
19
COVER STORY A SOCIAL DILEMMA market will celebrate its 13th anniversary in March. That has some economists concerned, with several predicting a market crash in 2022.
Ratio of covered workers to Social Security beneficiaries
• Social Security Trust Funds. In a late-August report, the Social Security trustees adjusted the projected year in which the trust funds will be depleted and the program will no longer be able to pay out full promised benefits. The new depletion date is 2033, when payments will be reduced to 78% of what was promised, the trustees said. Despite these risk factors, advisors preach delaying benefits as long as possible. Compared with claiming Social Security at the full retirement age (66 for those born from 1943 to 1954: 67 for those born in 1960 or later), claiming early at age 62 reduces the benefit by 30%. But starting benefits at age 70 provides the average retiree a net increase in benefits of $16,200 per year (24% more than full retirement age, or 77% more than at age 62) for as long as they live, Pfau noted. “The eight years of lost benefits could be viewed as a premium payment for a $16,200 inflation-adjusted lifetime income starting at age 70,” he explained.
‘Higher Wage Earner’
Of course, the decision on when to claim Social Security is not always about dollars and cents. Health factors and other potential financial emergencies require a case-by-case deliberation, said Heather Schreiber, founder of HLS Retirement Consulting in Woodstock, Ga. Schreiber
“If I have a rule of thumb on claiming, I think when you’re talking to a married couple, I’m always homing in on the higher wage earner,” she said. “That’s because claiming Social Security has a ripple effect, not only on their lifetime income but for the survivor. So I would say if the higher 20
wage earner could wait until at least full retirement age, that’s a good thing.” A financial professional for 28 years, Schreiber counts Franklin Templeton and AXA Advisors among her past employers. Along the way, she evolved into a holistic planner and found many advisors lack knowledge of Social Security and fail to treat it as a portfolio asset requiring attention. “About 10 years ago, when all the baby boomers were starting to retire, there was a big push for information from consumers and from the financial professionals who help them,” Schreiber recalled. “So I decided that I was going to dig deep and start really learning about Social Security.” Today, she is a frequent speaker at industry events, on radio and television, and often quoted as an expert in Social Security strategies. She created Social Security Advisor, a monthly newsletter designed to provide financial professionals and consumers with critical information on the topic. Schreiber is among the advisors who hear from clients who still think they can use a “file-and-suspend” strategy with their spouses. File and suspend was a Social Security claiming strategy that allowed married couples of full retirement age to receive
InsuranceNewsNet Magazine » February 2022
spousal benefits and delay retirement credits at the same time. It was ended as of May 1, 2016, by the Bipartisan Budget Act of 2015. Instead, Schreiber recommends a similar claiming strategy known as “restricted application,” which remains available for some claimants of full retirement age. Restricted application is available to anyone born before Jan. 2, 1954. “What it allows for someone to do is, instead of taking their own benefit, if they’re married to someone who has already filed or is willing to file, they can say I want half of his or hers right now,” Schreiber explained. “And I’m going to roll up my own benefit on delayed retirement credits until 70. That's still available. So that's the sweet spot of individuals who perhaps are waiting to claim.” It is one of several important claiming strategies Schreiber talks about in her newsletter. (See sidebar.)
A Marketing Boon
Tim Dern is the CEO of Mana Financial Group in Schaumburg, Ill. He finds leads and clients by holding free workshops sharing information about Social Security. Dern doesn’t try to sell anything or book clients, and he doesn’t offer a free steak dinner. Still, his “Retirement for Today” talks
A SOCIAL DILEMMA COVER STORY
CLAIMING RULES Social Security claiming rules can be complicated and are always changing, said Heather Schreiber of HLS Retirement Consulting in Woodstock, Ga. Although every client’s situation is different, Schreiber has several tried-and-true claiming strategies that she recommends. Here are three strategies.
1. RESTRICTED APPLICATION
A Social Security restricted application is a way for an individual to choose which Social Security benefit they wants to collect: his or her own, or half of their spouse’s. But there’s a catch. The number of individuals lucky enough to employ the strategy is dwindling daily. You must have been born by Jan. 1, 1954 to use the strategy. It allows the eligible individual to delay their own benefits to as late as age 70 and collect spousal (or ex-spousal) Social Security income in the meantime. For example, let’s say Frank was born in 1953 and plans to wait to age 70 to claim his benefit. His wife Joan was born in 1955 and is receiving her income benefit. Frank meets the age cutoff so he can collect 50% of Joan’s full retirement age benefit until age 70 and then switch to his own maximum benefit once he hits that milestone. This opportunity is often missed by eligible individuals, Schreiber said.
“When you’re dealing with a widow or widower, they can leverage survivor benefits with their own benefits in a way that's unique and that people miss most of the time.” 2. SURVIVOR BENEFITS
More than 5.8 million people were receiving Social Security survivor benefits in December 2021, AARP reported. These monthly payments typically go to the spouse, former spouse, or children of someone who was receiving or eligible for Social Security benefits. Survivor benefits are generally based on the amount the deceased was receiving from Social Security at the time of
death or was due to receive. However, there are plenty of rules on who can collect benefits and how much. About two-thirds of recipients are widows and widowers. They can collect survivor benefits as early as age 60 (50 if they are disabled), at rates ranging from 71.5 percent to 100 percent of the late spouse’s Social Security benefit, depending on the survivor’s age. Benefits may be withheld, however, if the survivor earns above a certain amount for claims made prior to full retirement age. There is an exception for those caring for a child of the deceased who is under 16 or disabled; in this case there is no minimum eligibility age and the survivor benefit is 75 percent of the deceased’s Social Security payment. A trusted advisor can help immensely in sorting out the best claiming strategy for survivor benefits, Schreiber said. “When you’re dealing with a widow or widower, they can leverage survivor benefits with their own in a way that’s unique and that people miss most of the time,” she explained. “What I mean by that is they could file first, for example, for the survivor benefit, as early as age 60. And, if their own retirement benefit will be greater at age 70, they can switch over to their maximum benefit at age 70. The opposite is also a viable strategy.”
3. WORK EARNINGS STRATEGY
Many clients want to continue working as a part of a fulfilling retirement. But it is important that they know the rules and plan a work schedule in harmony with a Social Security claims strategy, so they aren’t thrown for a loop, Schreiber said. “People don’t understand that if you try to file for a benefit before your full retirement age, and you continue to work, that you might be sent away by Social Security,” she added. “If earnings exceed a certain level, income in excess of the threshold could cause a portion or all benefits to be withheld. This can come as an unwelcome surprise for claimants who are unaware of the rule.” For 2022, benefits are reduced by $1 for every $2 a worker earns above $19,560. Reaching full retirement age in 2022 means an earnings limit increase to $51,960, up from $50,520 in 2021. At that point, benefits are reduced by $1 for every $3 above this limit. Once a worker reaches full retirement age, there are no reductions to their Social Security benefits, regardless of how much they earn. Further, if benefits have been withheld due to excess earnings, those benefits will be restored in the form of a higher monthly income benefit at full retirement age and beyond.
February 2022 » InsuranceNewsNet Magazine
21
COVER STORY A SOCIAL DILEMMA remain a popular draw in the Chicago area. “I feel like Social Security is the topic that people want to hear about,” Dern said. “And they don’t care whether or not they're getting dinner. So that's why I think it's a good topic for advisors to talk about when you're using this to sort of recruit new clients.” Although Dern doesn’t do a hard sell at his workshops, he gets plenty of business nonetheless. However, it didn’t always work out that way, he said. In the beginning, Dern would offer a lot of information
Security content to Medicare and overall retirement planning. “I tell everybody up front, ‘I’m a financial advisor. I do this five days a week. I’m a fiduciary,’” he said. “I want them to understand that I'm an advisor first. I just happen to know a lot about Social Security because most of my clients are over 60 years old, and they want to know about this.” When people consider their own real-life circumstances, the in-depth knowledge of Social Security separates Dern
combined with the voting muscle of older Americans virtually guarantees that Congress eventually will pass legislation to shore up the program. However, politics comes first, and that means any action likely will be delayed much longer than it should. “I don’t see that happening,” Schreiber said of the insolvency threat. “They will make the changes needed to bring solvency back.” The COVID-19 disruptions to the workforce resulted in a double dose of collateral
Sources and uses of Social Security revenues in 2020
Dern
to a room full of retirees, or near-retirees, and do a lot of work. And get very little business out of it. “They would say, ‘Oh, Tim, we have a real advisor for that,’” Dern recalled. “You know, like you’re the Social Security guy, but we have a real advisor. I thought, this is putting me in a bad position. I'm doing a lot of work.” He learned an important lesson: Social Security seminars can be a boon for advisors, but they must be done correctly. Dern massaged his presentation to include an important transition from Social 22
from the pack. Some people are in a second marriage and might have a child at home they can collect benefits on, he noted, or they might have a deceased spouse who could be a source of benefits. “This is the kind of stuff I’m doing in my seminar,” Dern said. “I'm showing them a lot of stuff that they probably wouldn't hear from the average advisor, but it's all information they need to know. Then at the end of the meeting, and I'll have 20-25 people in the room, I'll have a line of people who want to talk to me. I mean, they're engaged. They have questions. They want to meet.”
The Politics Of Social Security
One thing advisors say most clients have heard about is the threat to Social Security solvency. But advisors say it’s not much of a threat. The popularity of Social Security
InsuranceNewsNet Magazine » February 2022
damage to Social Security finances. People left the workforce, trustees reported, sapping the program of income. And a birth dearth has cut into the number of future workers the program had projected in previous reports. Funded by a payroll tax applied to wages earned, Social Security’s finances have been declining for years, with annual payroll tax income insufficient to cover the program’s benefit payments since 2010. The program has relied on interest paid into the trust funds over the past 25 years, when revenue was greater than payouts and the excess income was pumped into the trust funds, earning interest from intragovernmental loans. Last year was the first that the combined income from payroll taxes and interest wasn’t enough to cover promised benefits, the trustees said. That imbalance
A SOCIAL DILEMMA COVER STORY
Impact of Social Security Delay on Retirement Withdrawals Age
Real Benefits Age Real Benefits 62 Start Age 70 Start
Difference
Real Return Delay by Age
62 63 64 64 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90
$21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000 $21,000
$0 $0 $0 $0 $0 $0 $0 $0 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200 $37,200
($21,000) ($21,000) ($21,000) ($21,000) ($21,000) ($21,000) ($21,000) ($21,000) $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200 $16,200
-22.2% -15.5% -10.9% -7.6% -5.1% -3.2% -1.7% -0.4% 0.6% 1.5% 2.2% 2.8% 3.3% 3.8% 4.2% 4.5% 4.8% 5.1% 5.3%
95
$21,000
$37,200
$16,200
6.1%
100
$21,000
$37,200
$16,200
6.6%
Social Security 2100
While its chances of passage appear dim, House Democrats are hoping for a vote this spring on Social Security 2100: A Sacred Trust. The 2100 Act is cosponsored by 90% of House Democrats, and its chief sponsor, Rep. John Larson, D-Conn., claimed it will shore up the program for decades to come. The bill includes numerous provisions to improve Social Security, including increasing the minimum benefit for low-income retirees, switching what the consumer-price index benefits are currently tied to so they reflect the expenses of the elderly and offering caregiver credits for people who leave the workforce to care for loved ones. It is the funding that is controversial. Larson’s bill would expand the payroll tax cap on workers who earn more than $400,000 and phase in workers who earn between the current inflation-adjusted cap of $142,800 and $400,000 over the years. While the bill has few fans among conservatives, retiree advocates are supportive. “It is urgent, indeed imperative, that this Congress vote on expanding Social Security to address the nation’s looming retirement income crisis, as well as other challenges confronting our country,” Nancy Altman, president of Social Security Works, told House lawmakers during a fall hearing on the bill.
Source: Heather Schreiber’s Social Security Advisor
will continue for the rest of the century, with the two combined trust funds depleted in 2034. Under the law, Social Security then will have to cut its payments to meet income and will pay out 78 cents on each dollar the program has promised to pay. By 2095, the end of the 75-year actuarial period the trustees studied, the program will pay out
From 1974 to 2008, the ratio was 3.2 to 3.4 workers per beneficiary. That began to decline with the Great Recession, and it is now down to 2.7 workers per beneficiary. By 2035, when most baby boomers will have retired, the ratio will be 2.3 workers per beneficiary.
74 cents on each dollar promised. Chuck Blahous, formerly public trustee for Social Security, told The Washington Times, “If we wanted to fix the system and we wanted to act immediately, we would have to cut benefits 21% next year.” The ratio of workers supporting retirees has flipped, which is another underlying issue impacting Social Security.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.
Like this article or any other?
Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com.
February 2022 » InsuranceNewsNet Magazine
23
LIFEWIRES
Life Insurers Paid Record Amounts To Beneficiaries In 2020 Life insurance companies paid more than $90 billion to beneficiaries of life insurance
policies in 2020, the highest ever in any single year. That’s according to the American Council of Life Insurers. It also represents a 15.4% increase in payments over 2019, which is the largest year-to-year increase since the 1918 Spanish influenza pandemic. According to ACLI’s 2021 Life Insurers Fact Book, total life insurance coverage reached $20.4 trillion in 2020, with a record $3.3 trillion in life insurance coverage purchased. In total, 43.1 million life insurance policies were purchased in 2020. Group life insurance policy sales increased 19% from 2019 to 2020. Individual coverage increased nearly 3%.
PRUDENTIAL TO FREEZE SOME RETIREE HEALTH BENEFITS
Prudential will stop contributing to medical savings accounts for retirees this summer. In addition, Prudential retirees must now use all the money accrued in the accounts over 20 years, rather than over their lifetime. And any remaining balance reverts back to Prudential. Longtime employees’ account values grew to hundreds of thousands of dollars over decades. That’s in part because Prudential credited the accounts a 4% annual interest rate. That also stops under the new benefit.
DID YOU
KNOW
?
24
ALLIANZ REIGNS SUPREME IN SPORTS SPONSORSHIP
Among insurers, Allianz is at the top of the game in sports sponsorship. Allianz spent $103 million in sports sponsorship in 2021, double that of its nearest rival, Geico. That’s according to GlobalData. Allianz had the highest deal volume, with 44 partnerships in 2021, and the company focused on multiple venue title sponsorships in international markets. Allianz’s sports marketing investments have made it a familiar name to sports fans, especially in Germany, Italy and Austria where it holds several soccer venue partnerships.
QUOTABLE The purchase of life insurance is based on love. — Rick Bowers, owner of Rick Bowers Insurance, Annapolis, Md.
2021 WAS SOLID FOR LIFE INSURANCE STOCKS
Last year was a solid year for life insurance stocks, with the sector keeping up with financials overall and rising by about a third, The Wall Street Journal reported. But whether 2022 will bring increasing benefits to shareholders depends on several factors. Overall, life and health insurance stocks on the S&P 500 gained 32% last year. Despite paying out record benefits over COVID-19 fatalities, life insurers also had strong returns on their investment portfolios. A flood of private-equity money into the industry has also enabled insurers to shift some of their risks onto others. As vaccines emerged, they helped protect older populations more likely to have individual policies. One question as we move into another year of the pandemic is whether COVID-19 will have a lingering effect on the health of those who were infected and survived.
28 of 34 insurers surveyed endorsed accelerated underwriting for term insurance.
InsuranceNewsNet Magazine » February 2022
Source: Milliman
LIFE
11 Ways To Knock Your Initial Meeting Out Of The Park By doing your homework and listening more than you talk, you’ll have a successful initial meeting with business owner prospects.
F
By Debbie Rooks
irst impressions are important, and your initial meeting with a business owner will often determine whether you’ll get a second appointment. Over the past 25 years, I’ve participated in hundreds of initial business owner meetings. Here are a few tips that will help ensure a successful initial meeting.
1.
Research the business prior to your meeting.
Do they have a website? Have you looked up the owner or owners on LinkedIn? Do you have any connections in common? Research the current issues facing their industry. For example, when unemployment is very low, there is tremendous competition for hiring among construction-related businesses such as engineering firms, architectural firms and construction companies. Therefore, 26
the business owner probably would be interested in learning about solutions to recruit, retain and reward key employees. If it’s a family-owned business, familiarize yourself with typical family business issues such as how they’ll equalize the estate between the kids and whether they have a viable succession plan. If you have access to a home office advanced sales department, give them a call and discuss your upcoming meeting. For example, if you’re meeting with the owner of a construction company, ask the advanced sales team member, “Are you seeing many cases with construction companies? What types of solutions are being proposed? What are the primary issues?” You’ll find you get very different answers for different industries, family-owned businesses, C corporations, sole proprietors, etc. The main point is that you should be as prepared and knowledgeable as possible for that initial meeting.
2.
Try to spend 10% of your time talking and 90% of your time listening.
I once heard a successful advisor say, “In that initial meeting, if you’re talking, you’re losing.” How can you spend 10% of your time talking? Make sure you’ve prepared
InsuranceNewsNet Magazine » February 2022
some good open-ended questions. Here are a few of my favorites:
» Can you take a few minutes and tell me about your business?
» What are the biggest challenges your business or industry currently faces?
» What are you doing to recruit, retain and reward your key people?
» Who in your business would you least want a letter of resignation from, and why?
» Can you take a few minutes and tell me what motivated you to agree to take time out of your busy day to meet with me?
Your goal should be to leave the meeting with a great understanding of their business and concerns.
3.
Always establish a great relationship with the gatekeeper.
The gatekeeper may be their executive assistant or someone in human resources. Your relationship with them can be vital for future access to the business owner. Treat the gatekeeper with respect and engage them in conversation. Make them an ally
11 WAYS TO KNOCK YOUR INITIAL MEETING OUT OF THE PARK LIFE in building your relationship with the business owner.
4.
Business owners are busy and appreciate it when you respect their time.
I like to confirm how much time they’ve allotted for our initial meeting. When I do a good job of asking open-ended questions and stick to my 90/10 listening rule, the meeting almost always goes over their
created significant conflict among family members. It’s unfortunate, but there are hundreds of stories of businesses that failed due to no planning or poor planning.
6.
Think strategically.
As you begin to build a relationship with the business owner, think strategically. Does the owner have
Advisors Can Answer Business Owners’ Most Burning Questions • How much is my business worth? Is there a market for it? • Am I prepared to transfer ownership of my business to the right person, at the right time, at the right price? • How do I make sure my business can survive if I lose a key employee — or if it loses me? • What are some ideas to attract top talent who can help me build my business now — and when I’m gone? SOURCE: Principal Financial allotted time. Business owners love talking about their businesses. They appreciate the fact that you are listening and trying to understand their business.
5.
Tell stories when it’s appropriate.
Business owners are experts in their field, not ours. They may not remember the differences between a cross purchase and an entity buy-sell agreement, but they will remember relevant stories. Here are two that are easy to find on the internet:
» Estate of Cohen v. Booth Computers,
2011 WL 2694288 (N.J. Super 2011). A business valuation method in the buy-sell agreement that was inconsistent with IRS valuation guidance cost Claudia Cohen’s heirs over $11 million.
» Naito v. Naito, No. 9805-03781,
A10752 (Or. Ct. App. 2001). The verbiage in an old buy-sell agreement caused years of very expensive litigation and
other trusted advisors such as an attorney or a CPA? For example, my company offers complimentary informal business valuations for business owners. Get permission from the business owner to include the CPA in the discussion. We also offer complimentary buy-sell agreement reviews. If we discover some provisions that need to be tweaked, I encourage the advisor to include the attorney in the preliminary discussion. Whenever possible, you want their trusted advisors to be “with you” and not “against you.”
7.
Prioritize concerns before you end the meeting.
If multiple needs or concerns are expressed, ask the business owner to prioritize them before you end the meeting. For example, there may be dissatisfaction with a 401(k) plan, concern about the potential departure of a key employee, and concern about his or her own personal retirement. Summarize the list of concerns and the order of importance to the owner.
8.
Never shy away from joint work.
9.
In the initial meeting, keep solutions as simple as possible.
If you’re new in the business market, one of the best ways to build your confidence is to do joint work with an advisor who is experienced in the business market. The knowledge you’ll gain is well worth a commission split.
At some point in the sales process, you may need to get into the details of a buysell agreement or a split-dollar plan. The initial meeting is not the time to do this. Most business owners will become confused if you overwhelm them with details and will shut down as a result.
10.
Never be afraid of saying “I don’t know.”
I’ve witnessed too many advisors getting into trouble when they think they need an answer for every question. I have lots of professional designations and experience in the business market, and almost every week I get a question that I’ve never been asked before. I’ve learned that business owners respect me more when I say, “I don’t know, but I have a team of experts I can consult with, and I’ll get back to you with the answer.”
11.
Discuss next steps.
It’s always a good idea to discuss a specific set of action plans and a date for the next meeting. I was recently presenting at a workshop with a group of advisors, and one of them stated this a little differently. He said, “I try to never leave an initial meeting until the business owner asks me when we can schedule the next meeting. That’s when you know you’ve had a great initial meeting with a business owner.” Debbie Rooks, PhD, CLU, ChFC, RICP, is a small and medium-sized business developer with Principal Financial Group. Debbie may be contacted at debbie. rooks@innfeedback.com.
February 2022 » InsuranceNewsNet Magazine
27
ANNUITYWIRES
Top 10 Countries for Retirement Security
Global Workers Pessimistic About Retirement
1. Iceland
6. New Zealand.
2. Switzerland
7. Australia
3. Norway
8. Germany
4. Ireland
9. Denmark
5. Netherlands
10. Canada
Source: Natixis Investment Managers .
Even some well-positioned savers have grave doubts about whether they will be able to retire with confidence. In fact, 40% of investors say “it will take a miracle” to retire securely, a new global retirement survey by Natixis Investment Managers found. Forty-five percent of respondents are so concerned about retirement, they avoid thinking about it. The sentiment is surprising because these are active savers. They put away an average of 16.6% of their annual income for retirement, Natixis reported. As investors, they report investment returns of 12.5% above inflation in 2020 and expect to earn 14.5% above inflation over the long term. Why are they insecure about retirement? It could be the pandemic mindset, Natixis said. After seeing the world locked down for more than a year and hearing daily reports on hospitalizations and fatalities, it’s easy to be pessimistic. Inflation, low interest rates and overall economic anxiety contributed to doubts about retirement security, Natixis reported.
‘SERIAL DEFRAUDER’ GETS PRISON IN INSURANCE-ANNUITY SWINDLE
A former Arizona insurance agent is headKoreasa Williams ed to federal prison for more than four years for stealing a total of more than $1 million from her elderly clients. Koreasa “Kory” Williams was sentenced to 51 months behind bars and three years of supervised release as part of a plea deal. Williams, 46, who founded a Christian counseling service in Tucson earlier this year, was described by a prosecutor in a sentencing memo as “a serial defrauder and thief on an enormous scale.” Initially charged with 65 counts of wire fraud and eight counts of aggravated identity theft, she agreed to plead guilty to one count of wire fraud. The other charges were dropped. A 2019 indictment said Williams targeted clients with annuities held by life insurance firms. From 2011 to 2018, she forged their signatures and submitted false paperwork to withdraw money DID YOU
KNOW
?
28
from annuity accounts without their knowledge.
PENNSYLVANIA PASSES ANNUITY SALES RULES
Pennsylvania recently became the 19th state to pass an annuity sales model law produced by the National Association of Insurance Commissioners. The model articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation. The 19 states that have adopted the model regulation are Alabama, Arizona, Arkansas, Connecticut, Delaware, Idaho, Iowa, Maine, Michigan, Montana, Nebraska, North Dakota, Ohio, Rhode Island, Texas, Virginia, Kentucky,
QUOTABLE Advisors have struggled to find a place to allocate cash or get stable, predictable returns. — Tony Compton, divisional vice president of broker-dealer and RIA sales, Great American Life
Mississippi, and Pennsylvania. “The new law in Pennsylvania adds momentum to the nationwide push for protections that safeguard consumers while also ensuring that middle- and working-class families retain access to annuities,” said Susan Neely, president and CEO of the American Council of Life Insurers.
TIAA ANNOUNCES ANNUITY PAYOUT BOOST
Some TIAA annuity holders received a nice Christmas bonus this year. Beginning in January, lifetime income payments to holders of the TIAA Traditional Fixed Annuity1 who opted to annuitize in retirement increased by 5%, the largest boost in 40 years. The additional payout of $180 million to clients of the company’s flagship offering will bring the total income paid to retirees in 2022 to $3.6 billion. TIAA Traditional has paid more in lifetime income than its contractually guaranteed minimum amount every year for the last 70 years, the company said, providing clients who choose to annuitize with a foundation of guaranteed lifetime income payments regardless of market conditions. All told, TIAA has paid more than $505 billion in benefits since 1918, the year TIAA was founded and 17 years before Social Security began. TIAA’s retired clients have never missed a payout.
Some 40% of savers are very confident that they’re on track for a survey by Kiplinger comfortable retirement, and 44% are somewhat confident. Source: and Personal Capital
InsuranceNewsNet Magazine » February 2022
MarketForce Bonus IndexTM Annuity MarketMax IndexTM Annuity
Rate Buy-Up Index Annuities
7.0% MGA Commission 10-Year Design
Offer your accumulation-focused clients higher cap and participation rates on selected accounts – in exchange for an annual fee.
MarketForce Bonus Index Annuity • 8% Premium Bonus • Single Premium • Buy-Up Account Annual Fee: 1.5% MarketMax Index Annuity • Even HIGHER Cap and Participation Rates • Flexible Premium • Buy-Up Account Annual Fee: 1.0% Competitive Advantages • Annual fee guaranteed not to increase for the life of the contract • Illustrated rates are among the highest in the industry • Full premium bonus (and full agent comp) up to maximum issue age 80
Surrender of the contact subject to surrender charges or market value adjustment. Product and riders not available in all states or may vary by state. Withdrawals before age 59½ may result in a 10 percent IRS penalty tax. Withdrawals do not participate in index growth. Guarantees subject to the claims-paying ability of EquiTrust Life Insurance Company. MarketForce Bonus Index contracts issued on Form Series ICC19-ET-MP10-2000(02-19) or ET-MP10-2000(05-18). MarketMax Index contracts issued on Form Series ICC12-ET-EIA-2000(01-12) or ET-EIA-2000(06-04). Riders issued on Form Series ICC18-430-NHW(06-18) or 430-NHW(08-03); ICC16-ET-TI(10-16) or ET-TI(10-16). EquiTrust does not offer investment advice to any individual or agent and this material should not be construed as investment advice. Products underwritten and issued by EquiTrust Life Insurance Company, West Des Moines, Iowa. Products distributed by EquiTrust Insurance Marketing Services; in California doing business as EQT Insurance Marketing Services. For Producer Use Only. IC21-EQT-1132
Learn more about these exciting Rate Buy-Up Annuity Products! Talk to your marketer, or call us at 866-598-3694. More information available at Agents.EquiTrust.com.
ANNUITY
Situations Change. Solutions Can, Too. Consider 1035 exchanges for evolved client needs and enhanced product designs. By Deborah A. Miner
W
hat’s one thing cars and drivers have in common? Both have advanced tremendously over time. To clarify: This regards automobiles and golf clubs, not automobile operators. But consider someone who has only driven the same car or swung the same driver for many years. Expect them to be taken aback by just how improved current offerings are versus the model that’s long resided in their garage or golf bag. And that in turn spurs them to upgrade their ride or their club. Now consider someone who owns an older life insurance or annuity contract. Once they’re made aware of the advantages provided by a newer contract, they likewise may want to trade up. A key difference, however, is that while cars and clubs typically lose value over time, life insurance (depending on the type) and annuity contracts may be worth more now than when they were purchased. Surrendering such contracts might require gains to be included in taxable income. Surrenders of modified endowment contracts and annuity contracts may also result in a 10% early distribution penalty unless an exception is applicable. Understanding the implications is a must.
1035 Exchanges: Begin With The Basics
A nonqualified, or NQ, annuity can be exchanged only for another annuity or a qualified long-term care policy. It generally is conceded that the owner and the annuitant must be the same before and after an exchange of annuity contracts. In recent years, however, some carriers have interpreted the regulation’s requirement that the “obligee” remain the same to most likely mean the owner only. A few carriers 30
may allow an exchange where the annuitant does not stay the same. Certain others may allow an annuitant to be added but not changed. And many may still require both to remain the same. A life insurance policy can be exchanged tax free for another life insurance policy, an annuity contract, an endowment contract or a qualified LTC policy. The owner and the insured must be the same before and after an exchange of life insurance policies. A survivorship policy cannot be exchanged tax free for a single life policy unless only one insured is still alive.
Best Interest Is Essential While not all Section 1035 exchanges are replacements, many are. First and foremost, any replacement must be in the client’s best interest, with the client receiving a net benefit. Be sure to be in compliance with all applicable state replacement regulations and documentation requirements. In any case, a Section 1035 exchange must be just that: an exchange, not a surrender. The policyholder cannot surrender the policy and receive proceeds. The funds in the policy must be exchanged directly between insurance companies. Clients cannot change their mind after the fact. An endorsement to another insurance company of a check that is made out in the client’s name will not be treated as a taxfree 1035 exchange.
Partial NQ Annuity Exchanges: Another Option
The IRS allows partial NQ annuity exchanges under Section 1035.
InsuranceNewsNet Magazine » February 2022
A partial annuity exchange will qualify as a tax-free exchange if no amount is received under either the original contract or the new contract during the 180 days beginning on the date of the transfer. An exception to the “no withdrawal” is provided for amounts received as an annuity for a period of 10 years or more or during one or more lives. Thus, partial annuity exchanges — from deferred annuities into certain immediate annuities — are permitted. Basis must be allocated pro rata between contracts. A contract owner cannot transfer all gain or all basis in an effort to avoid paying taxes on any gain in a contract.
NQ Stretch Exchanges: Added Flexibility
Non-spousal beneficiaries of NQ deferred annuities may have an NQ stretch option. An NQ stretch allows non-spouse beneficiaries to take distributions of an annuity death benefit over their life or life expectancy. As the beneficiary may withdraw more at any time, it offers more flexibility than annuitization. PLR 201330016, a private letter ruling from the IRS, permitted a non-spousal beneficiary to do a 1035 exchange of one inherited NQ deferred annuity for another one as long as the required distribution rules of 72(s) continued to be met. A PLR may not be used as precedent and applies only to the taxpayer requesting the ruling. Not all carriers offer an NQ stretch option. Some that don’t may allow a tax-free Section 1035 exchange to a carrier that does allow NQ stretches. Others might not. A best practice may be to review NQ annuity contracts and carriers and consider moving contracts to a stretch-friendly carrier before the death of the owner or annuitant of the contract.
Protection Pivot: Life Insurance To Annuity Exchanges
Since an annuity offers only tax-deferral and not tax-free payouts, when might it be appropriate to consider exchanging a life insurance policy for an annuity contract? Two instances where such an exchange might be appropriate would be if the life insurance is no longer needed or if the life insurance policy is "underwater." A life insurance policy is underwater when its cash value is less than the total premiums paid for it. If more has been paid
SITUATIONS CHANGE. SOLUTIONS CAN, TOO. ANNUITY
Exchanging a life insurance policy that is underwater to an NQ annuity can preserve the basis and allow it to be recovered tax free via the annuity payments. into the policy than the current cash value, any loss cannot be claimed on a 1040 tax return. But exchanging a life insurance policy that is underwater to an NQ annuity can preserve the basis and allow it to be recovered tax free via the annuity payments.
Joan Jumps From Insurance To Annuity
Joan, age 55, owns a permanent life insurance policy that has underperformed and is no longer needed. She has paid total premiums of $160,000 ($16,000 annually for 10 years), but the policy’s cash value is only $115,000. If Joan desires income now, she could exchange the life policy for a single-premium immediate annuity. She
would be recovered tax free from the annuity payouts.
Needs Change: Solutions Can, Too
executes a 1035 exchange of the $115,000 cash value into an SPIA, which would have a basis of $160,000. She would have an exclusion ratio of 100% and would receive her payments tax free up until her basis was recovered. Payments received after that point would be fully includible in her taxable income. If Joan prefers income later, she could exchange the life insurance policy for a deferred annuity. Finally, Joan also can put additional funds from her savings into the annuity. By doing so, she’ll increase the monthly amount of protected lifetime income she’ll receive from the immediate or deferred annuity. Any additional premium also
IncomeShield
Innovations in product design, challenging economic times, changing tax policies, and evolving client circumstances and expectations may warrant review of current products. It’s important to review risk exposure and consider growth opportunity, income certainty, tax efficiency and beneficiary protection. A Section 1035 exchange is simply another tool in the financial professional’s tool belt. Like any other tool, consideration of its use must weigh the pros and cons of the specific case at hand. Bottom line: Keep the Section 1035 exchange in mind when helping clients address retirement and legacy goals. Deborah A. Miner, JD, CFP, CLU, ChFC, RICP, is assistant vice president of advanced markets for W&S Financial Group Distributors. She may be contacted at deborah.miner@innfeedback.com.
FIXED INDEX ANNUITY
Ensure clients the dignity of a paycheck for life
Boost Retirement Dollars
Generate Lifetime Income
Protect Retirement Paychecks
7% bonus on all year-one premium*
5 Lifetime Income Benefit Rider (LIBR) options**
Lifetime income payments available after 30 days with no fee LIBR
For more information on the IncomeShield fixed index annuity, visit american-equity.com/incomeshield-annuity *Premium bonus available on IncomeShield 10. Bonus available on 1st year premiums. Each year after the 1st contract year, clients become vested in a percentage of the bonus, until 100% vested at the end of the 10th contract year. Vested amounts of the bonus are the amounts not forfeited as a result of an early withdrawal or surrender. Bonus, surrender charges, and vesting schedules may vary by state. See brochure and disclosure for details. **Available for issue ages 50+. Lifetime Income available through optional Lifetime Income Benefit Rider. Lifetime Income Benefit Rider may have annual fee based on the income account value, deducted from contract value. Surrender charges may apply to excess withdrawals that exceed 10% annual free withdrawal available under the contract. You may be subject to a 10% federal penalty if you make withdrawals before age 59 1/2. American Equity Investment Life Insurance Company® does not offer legal, investment, or tax advice. Each client has specific needs which should be discussed with a qualified legal or tax advisor. Annuity and Riders issued under form series ICC17 BASE-IDX, ICC17 IDX-10-7, ICC17 BASE-IDX-B, ICC17 IDX-11-10, ICC16 R-MVA, ICC20 R-LIBR-FCP, ICC20 R-LIBR-FSP, ICC20 R-LIBR-W-FCP, INVESTMENT LIFE INSURANCE COMPANY ICC20 R-LIBR-W-FSP and state variations thereof. Availability may vary by product and state. Guarantees are based on the financial strength and claims paying ability of American Equity. For agent use only. Not for use in solicitation or advertising to the public. 6000 Westown Pkwy, West Des Moines, IA 50266 TM
AMERICAN EQUITY
®
01AD-INN-1121 11.04.21
© 2021 American Equity. All Rights Reserved.
www.american-equity.com ● Call us at 888-221-1234
HEALTH/BENEFITSWIRES
US Health Care Spending Hit $4T In 2021 National health care spending jumped to $4.1 trillion in 2020 as Congress opened
a stream of federal dollars to battle the COVID-19 pandemic across multiple fronts. Health spending in the U.S. rose by 9.7% in 2020, more than double the usual growth rate, with health care accounting for nearly $1 of every $5 in the economy. The federal government share of health spending increased by 36%. But that spending growth wasn’t driven by care devoted to patients. Instead, it was driven by federal subsidies to keep hospitals and medical providers solvent; funding to develop and deploy COVID-19 tests, vaccines, treatments and countermeasures; and assistance to state Medicaid programs facing a potential wave of uninsured people in a public health crisis. The $4.1 trillion represents an increase of about $365 billion from national health spending in 2019. It works out to $12,530 per person.
ONE-THIRD OF KIDS LACK ADEQUATE HEALTH INSURANCE
A growing percentage of children in the U.S. are uninsured. The rate of underinsured youngsters rose from 30.6% to 34% — an additional 2.4 million kids — from 2016 to 2019, according to an analysis led by University of Pittsburgh School of Medicine researchers. Driving the trend is a higher rate of children who have inadequate insurance rather than an increase in those with inconsistent coverage or no health insurance at all. The researchers found families that have children with special health care needs and private insurance were hit particularly hard. Researchers defined underinsured children as those who lack continuous and adequate health insurance, with “adequate” meaning that insurance usually or always met a child’s needs, allowed children to see needed providers, and protected against what parents felt were unreasonable out-of-pocket expenses. The increase in underinsured children was driven by rising insurance inadequacy, mainly experienced as DID YOU
KNOW
?
32
high out-of-pocket expenses for health services. According to the researchers, this is concerning because high fees may force families to delay or forgo care for their child.
20% OF EMPLOYEES HAVE LITTLE KNOWLEDGE OF HEALTH PLAN
How satisfied and knowledgeable are workers about their health insurance? A survey from UnifiHealth shows one in five workers has little knowledge of their health coverage and nearly one in three is somewhat to very unhappy with their plan. The majority of workers ranked cost and coverage information as their top priorities regarding their health insurance plans. In fact, two-thirds of small-business employees said that knowing whether a visit is covered by insurance and knowing out-of-pocket costs in advance of a visit or procedure are most important. Additionally, nearly seven out of 10 employees of small businesses said that advance knowledge of coverage for a visit or procedure and out-of-pocket costs would persuade them to switch from their current health
QUOTABLE Age is the most important risk factor for almost every disease we deal with, so if we can just slow down aging a little bit, we can impact the development of heart disease, cancer, lung disease. — Dr. Douglas Vaughan, director of the new Potocsnak Longevity Institute at Northwestern University
insurance plan. Another survey finding revealed that more than 60% of employees either don’t have a relationship with their primary care physician or are open to a better one.
LTCI CLAIMS GREW BY $700M IN 2021
The nation’s long-term care insurers paid out $12.3 billion in claims during 2021. That’s an increase of $700 million over 2020 and a whopping $2 billion increase over the total claim benefits paid by the industry in 2018. The American Association for LongTerm Care Insurance, which released these figures, said claim benefits were paid to about 336,000 policyholders. The average claim amount paid out for 2021 is about $36,600. The number of individuals paid during 2021 grew by roughly 11,000 compared to the prior year. The amount reported represents claims for those owning traditional or health-based longterm care insurance. The report does not include data for those who have purchased a linked-benefit policy.
Marc Bertolini, former CEO of Aetna, is the new co-CEO of Hartford Bridgewater Associates, the world’s largest hedge fund. SOURCE: Courant
InsuranceNewsNet Magazine » February 2022
PROTECTING FAMILIES FOR MORE THAN 100 YEARS For more than a century, Mutual of Omaha has listened to customers and helped them through life’s transitions. Nowhere is that more clear than in our diverse product portfolio designed to meet client needs. Medicare Solutions Medicare Supplement, Prescription Drug Plans, Dental Insurance with optional Vision Benefit rider, Dental Savings Plan.
Life Solutions Indexed Universal Life with optional Long-Term Care rider, Term Life Answers, IUL Express, Term Life Express, Living Promise, Children’s Whole Life, AccumUL Answers, Guaranteed ADvantage
Health Solutions
A+
A1
A+
Superior
Good
Strong
This rating is the 2nd highest of 16.*
This rating is the 5th highest of 21.*
This rating is the 5th highest of 21.*
A.M. BEST
MOODY’S INVESTORS SERVICE
S&P GLOBAL
*as of 10/1/21
Long-Term Care, Critical Illness, Cancer, Heart Attack/ Stroke, Disability Income
Whether your clients are just starting off or looking to build a legacy, Mutual of Omaha is a carrier you and your clients can count on.
Coverage may not be available in all states and may vary by state. For producer use only. Not for use with the general public. 605955
For more information visit mutualofomaha.com/sales-professionals
February 2022 » InsuranceNewsNet Magazine
33
HEALTH/BENEFITS
Workers Have Spoken: Financial Well-Being Benefits Matter Although the economy is showing signs of improvement, workers need benefits that will help ease their financial stress. By Mike Wilbert
F
inancial well-being benefits have never been as important as they are today — for workers, employers, and benefit brokers and advisors. Workers, many of whom were living paycheck to paycheck prior to the COVID19 pandemic, find themselves farther behind the eight ball today and remain financially stressed. Employers feel the effects of worker financial stress on their bottom line and are now fighting to win the talent wars that ramped up as a result of the pandemic. Benefit brokers and advisors strive to make sure their product portfolios include an arsenal of financial well-being benefits in order to make sure their clients’ recruitment and retention efforts are competitive.
Employees And Their Finances: 2021
Nationwide Harris Poll research conducted on behalf of Purchasing Power reveals a great deal of insightful data on the state of employee finances, financial stress and COVID-19 effects. A key finding was that household income levels don’t discriminate. The survey shows that the pandemic had workers at all income levels living paycheck to paycheck from February 2020 through February 2021. Almost half of full-time employees in all household income levels reported that their financial situation was worse in February 2021 than it was prior to the COVID-19 pandemic. That includes 44% of those making more than $75,000 annually and 41% of those making an annual salary of more than $100,000. Faced with furloughs, layoffs and monthly income loss, employees turned to several sources to cover expenses. Delta 34
Air Lines reported in November 2021 that employees took about $1 billion in early withdrawals from their 401(k) retirement plans during 2020, indicating that workers were in financial stress. The Harris Poll survey showed how workers covered the monthly expense challenges of the pandemic, illustrating the impact on their financial well-being:
» 32% took money from savings.
still with us, and it will take more time for workers’ financial situation to recover. According to the survey, more than half of full-time workers expected their household financial situation to be better by January 2022; however, they anticipated their financial stress level will be the same or worse than it was last year. What are the top three things workers worry about most? Here’s what the Harris Poll revealed.
» 26% took money from their emergency
» 3 7% worry about having enough in
fund.
their or their spouse’s or partner’s employer.
emergency savings to cover unexpected expenses that might come up, such as car repair, home repair or a broken appliance. Those responses came from workers making less than $50,000 a year (44%) to those making more than $100,000 annually (34%) and all points in between.
» 13% received financial assistance from
» 3 5% worry about not having enough
» 17% withdrew funds from their 401(k) or other retirement savings.
» 1 3% requested a payday advance from
their or their spouse’s or partner’s employer.
» 10% took out a second mortgage or a
retirement savings.
» 3 4% worry about their mental or emotional health as a result of the pandemic.
home equity loan.
The workers who answered the survey readily admitted their financial stress negatively affects their work. This stress disrupts their physical health, their ability to focus, their productivity at work and their job satisfaction. This confirms that employee financial stress impacts the employers’ bottom line through increased health care costs, loss of productivity and lower employee retention rates.
Workers’ Financial Situation And Worker Stress: 2022
The Harris Poll found that 95% of employees reported they have financial stress, so what can we expect 2022 to mean for employee finances? Although the economy is better now than it was during the shutdown in 2020, the pandemic and its effects (as well as the current rise in inflation) are
InsuranceNewsNet Magazine » February 2022
Other items mentioned included unexpected medical expenses (30%), layoff or job elimination (27%), paying for basic necessities (26%), paying credit card bills on time (25%), incurring additional new debt (18%) and paying student loan debt (14%).
Voluntary Benefits In The Spotlight
Financial stress has always been a factor in the workplace, affecting workers' productivity and impacting their health and health care costs for the employer. Realizing that workers at all income levels are affected by financial stress, employers need to make sure their benefits packages provide robust financial wellness benefits that can provide a lifeline during these difficult times. Because they can address many of the specific needs that workers have as they continue to struggle with and overcome
FINANCIAL WELL-BEING BENEFITS MATTER
HEALTH/BENEFITS
NEEDED IMMEDIATELY:
Financial well-being benefits employees would be interested in taking advantage of if offered through their employer
Experienced Advisors Currently Working With Federal Employees
Employee Purchase Program..................................... 28% Bill Payment Programs.................................................27% Financial Counseling......................................................24% Low-Interest Installment Loans.................................24%
There are nearly 1.2M federal government employees eligible to retire in the next 10 years.
Identity Theft Protection.............................................23% Medical Deductible Financing.....................................23% Student Loan Repayment Benefit Program............15% SOURCE: The Harris Poll on behalf of Purchasing Power
pandemic challenges, voluntary benefits have taken on a significantly more important role now. In recent years, voluntary benefits have seen more popularity as the products themselves have become more diversified and appealing to the multiple generations in the workplace. But then, voluntary benefits have always been a win-win for employers and workers. For employers, voluntary benefits are an excellent recruiting and retention tool, while workers see voluntary benefits as an opportunity to choose benefits that they need or want. The impact of COVID-19 on workers’ lives and their finances really put the spotlight on the value of voluntary benefits, which have given employers a way to meet the shifting needs and priorities of their workforce during this critical time. Virtual care, mental health services, critical illness coverage, child care and financial well-being are among the needs and priorities for employees these days as they deal with pandemic reality.
Why Financial Well-Being Benefits Matter
There’s a lot of talk right now about the “Great Resignation,” the spike of workers voluntarily leaving their jobs in response to the COVID-19 pandemic. But workers aren’t leaving the workforce. Instead, they are seeking better opportunities and accepting new jobs, and it’s not really about money. They are going to new jobs where they will have more family time and a better work-life balance, and where employers
value them more. Workers want to know their employers care about them. And they expect employers to show they care by the benefits they provide, especially financial well-being benefits. In the Harris Poll, workers strongly indicated that financial well-being benefits do matter.
» 78% of full-time workers reported that
they can tell how much their employer cares about their financial well-being by the benefits they offer.
» 79% said they would be more likely to
stay with their present employer if the employer offered more financial wellbeing benefits. It will take time for workers’ financial situation to improve, and their financial stress in turn impacts their employers’ bottom line through increased health care costs, loss of productivity and decreased worker retention rates. Smart companies are finding ways to help, which will ultimately mean increased worker performance and improved retention. Mike Wilbert is chief revenue officer at Purchasing Power, a voluntary benefit provider. He may be contacted at mike.wilbert@ innfeedback.com.
February 2022 » InsuranceNewsNet Magazine
35
This market is extremely underserved and we’re looking for experienced advisors who can help them plan for retirement. Join our advisor team of government specialists and receive: State of the art proprietary individual employee benefit and retirement analysis software Competitively priced life insurance products designed specifically for government employees 85 years in the business helping agents expand and grow their practices while serving government employees Add the efficiency of a home office that navigates the process of new business, allotment funding, and policy issue
Visit ServeFedMarket.com to access your risk-free guide and start helping this underserved market right now.
Financial facts and figures powered by AdvisorNews.com
Inflation Looms As Biggest Retirement Risk In 2022 Americans say they worried the most about the COVID-19 pandemic in 2021, but a new threat to their retirement plans is looming: rising inflation. The annual New Year’s Resolutions Study conducted by Allianz Life revealed inflation is seen as the biggest risk to Americans’ retirement plans. Nearly half (48%) of respondents identified the pandemic as the most worrisome threat of 2021, with the rising cost of living following at 38%. However, looking ahead, a full one-quarter of Americans now view rising inflation as the single greatest risk to their retirement plans, more than doubling from 2020 (8%). The survey also found a low desire for professional assistance with financial planning among the respondents. In fact, only 22% of respondents said
they are more likely to seek the advice of a financial professional in 2022, down from 27% last year.
When Do Americans Hope To Retire?
The average age at which Americans hope to stop working is 62. But exactly when people hope to stop working varies by generation. Those were among the findings of a Natixis Investment Managers survey. Generation Y — ages 25 to 40 — plans to retire at an average age of 59. For Generation X — now 41 to 56 — the average age is 60. Baby boomers — who range from 57 to 75 — indicated they plan to work longer, with an average expected retirement age of 68. Eighty-three percent of investors who are still in the workforce said they are confident they will be financially secure in retirement . Yet 41% of respondents said achieving financial security in retirement is “going to take a miracle.”
Retirement may be longer than expected. According to the Social Security Administration, a healthy 65-yearold woman has a very good chance of living to age 86, and a 65-year-old man has a good chance of reaching age 84. More Americans are planning for longer-than-expected retirement. According to a TD Ameritrade study, 81% are moving money in preparation for living 36
InsuranceNewsNet Magazine » February 2022
When young adults want financial advice, they’re more likely to turn to YouTube or
TikTok than they are to speak with an advisor. That’s the word from the National
Association of Personal Financial Advisors, which found that more than one-third 38% of millennials (39%) of Americans said they feel unprepared for their under the age of 65 financial future. are receiving their financial advice online 30% of Generation Z feels or from social media. unprepared. And that lack of SOURCE: National financial guidance Association of Personal is inhibiting their Financial Advisors ability to prepare for retirement, with more than one-third (34%) of millennials and Generation Z saying they need advice to help them get ready for their post-employment years.
The younger the age group, the younger they hope to retire, the survey found.
The State Of Retirement: Some Statistics
Younger Generations Look To Social Media For Advice
DID YOU KNOW?
62% of businesses with a 401(k) automatically enroll workers in the plan. SOURCE: Plan Sponsor Council of America.
Of the social media platforms out there, YouTube seems to be the most popular place for Gen Z (63%) and millennials (71%) to discuss financial planning, while TikTok is gaining popularity with Gen Z (56%), according to the survey. More than 60% of the respondents who receive their information online said that they have acted on that advice. longer than their ancestors did by reducing expenses, buying secured life insurance and maximizing their contributions to retirement plans. Many Americans are accessing their retirement funds early. The TD Ameritrade
survey showed that 44% of Americans ages 40 to 79 have taken money out of a retirement plan, while 46% of people 40 to 49 have done so, as have 53% for people 70 to 79.
Get the Latest P/C News
Get our weekly P/C Newsletter or read hundreds of property & casualty and multiline stories now! Starting in January 2022, we’re proud to bring you our newest magazine section, Multiline. But did you know that InsuranceNewsNet publishes dozens of Property & Casualty stories every month? Simply visit our website at insurancenewsnet.com and click into the Property & Casualty topic to start reading right away, or sign up for our newsletter and get critical P/C News delivered straight to your inbox every week.
Sign up to receive the P/C Week Newsletter in your inbox at
insurancenewsnet.com/manage-preferences
May 2020 » InsuranceNewsNet Magazine
37
3 Ways To Change Communities Through 401(k) Plans Financial planners have an opportunity to change communities and help create a retirement-ready nation through leadership in the retirement plan niche. • Amie Agamata
A
s more baby boomers near or enter retirement age, there’s a realization that many Americans regardless of their generation have little to no retirement savings. In large part this is because pensions have become less popular over the past few decades. It’s rare to have a pension plan these days, and those without pensions may not have access to a retirement plan through their work either. Not only does this present an issue for middle- and upper-income individuals, but it’s also a real problem for lower-income individuals, especially those in underserved communities. Financial planners have an opportunity to change communities and help create a 38
retirement-ready nation through leadership in the retirement plan niche. Business owners often look to their advisors to implement 401(k) plans for their employees. Although some business owners choose to omit various 401(k) features, it’s up
1. Automatic Enrollment
Automatic enrollment is essential to transform communities, including those in low-income, underserved areas. By setting up the plan with automatic enrollment, employers nudge employees to build better
It’s rare to have a pension plan these days, and those without pensions may not have access to a retirement plan through their work either. to us as the advisors to encourage and provide leadership to help the employer recognize their opportunity to make an impactful difference in their employees’ lives through what’s possible in the plan document. Here are three 401(k) features that help change communities, especially those with lower incomes:
InsuranceNewsNet Magazine » February 2022
saving habits and, more importantly, help them get on track for retirement. Some employers resist this plan feature because they feel their employees may resent them if the plan includes automatic enrollment. However, most times, the plan is set up with conservative yet meaningful salary deferral defaults from 3% to 6%. While some may argue that 3% to 6% is not
3 WAYS TO CHANGE COMMUNITIES THROUGH 401(K) PLANS
enough to save for retirement, it’s at least a start, especially for those who may not understand or recognize the importance of saving. Our team typically recommends starting at 5% as studies show that the enrollment rate does not materially change between 3% to 5%. It’s important to note employees always have the option to opt out of the plan if they don’t want to save for their retirement. Employees also have the option to save more than the default amounts if they prefer. For the occasional employee who forgets to turn in the paperwork to opt out, the plan can also include a feature that allows the money to be returned to the employee within a certain amount of time.
more each year as their salaries typically increase with inflation on an annual basis. Employees always have the option to opt out of the default plan settings or elect other saving options that they feel are in their best interest.
3. Automatic Reenrollment
Automatic reenrollment is what it sounds like. It’s basically automatic enrollment that reoccurs each year, meaning that if an employee initially opted out of the plan, then that person would be automatically enrolled at the beginning of the next plan year. This is important because it essentially sweeps those who elected not to save for whatever reason into the plan. It gives
employer-sponsored retirement plan. Moreover, we often have seen enrollment rates between 90% and 100% when the plan is set up with the proper features. On a national average, only 25% of plan participants are generally on track for retirement, but when the plan is designed with an understanding of behavioral finance, then these metrics tend to increase to over 67%. From time to time, metrics for those on track for retirement are over 90%. Many of the state IRA programs are structured with these same ideas in mind. For instance, the State of California’s CalSavers program has currently achieved a 70% enrollment rate implementing these three program features.
In 2020, there were about 600,000 401(k) plans, with about 60 million active participants and millions of former employees and retirees. SOURCE: Investment Company Institute
Only 32% of Americans are investing in a 401(k) plan, while 59% of employed Americans have access to one. SOURCE: U.S. Census Bureau Automatic enrollment not only benefits employees, but the employer may also benefit by claiming a tax credit of $500 if they add an auto-enrollment feature to their plan.
2. Automatic Escalation
401(k) plans can include an automatic escalation feature, which means each year, the employee’s savings rate automatically increases by a chosen percentage set forth in the plan document. As an example, the plan can stipulate the deferral rate to start at 3% with 1% annual automatic escalation up to 15%. That means the following year, the deferral rate would automatically increase to 4%, then 5% the next year and so forth until the employee is saving 15% of their salary. Automatic escalation is key to helping employees continue saving more and
employees another opportunity to start saving for their retirement without having to fill out any paperwork. These three plan features play off behavioral finance and inertia. As advisors, we all have experienced some clients or prospects who delay making important decisions because it requires them to act in some capacity. When an employer uses the 401(k) plan's automatic features, employees are defaulted into the right saving decisions that take little to no effort on their end. More effort is required if they want to opt out of the plan. The more important question is, how do 401(k) plan design and implementation change outcomes for disadvantaged, low-income and minority communities? For starters, low-income individuals may be eligible for a 10% to 50% Saver’s Credit if they contribute to their
By understanding how these simple automatic plan features work, financial planners can fundamentally change communities and help create a retirement-ready nation. Amie Agamata is a Certified Financial Planner in San Diego, Calif. Amie serves as the NexGen President for the Financial Planning Association of San Diego and is a member of the FPA Retirement Income Planning Advisory Council. She may be contacted at amie. agamata@innfeedback.com.
Like this article or any other?
Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com.
February 2022 » InsuranceNewsNet Magazine
39
MULTILINEWIRES
Colorado Wildfire Victims Face Insurance Challenges
It was bad enough that residents and business owners lost everything in the Marshall wildfire that swept through Colorado in late December, destroying nearly 1,000 homes. Now they face a daunting insurance situation in which skyrocketing property values and supply-chain shortages make it unlikely that many home or business insurance policies will cover the full cost of rebuilding. The Marshall fire stands to eclipse every other fire in Colorado history, and damages may approach $850 million by the time they are tallied. “Statewide, we’ve had all these increases in property values, and very often, the policies don’t keep up,” said Brad Levin, partner at the Denver law firm Levin Sitcoff Waneka. Some policies may come with riders for inflation, Levin said, but those often don’t match the actual inflation rate. Oftentimes, homeowners and businesspeople will purchase the most-affordable policy then not update their policy limits as it goes unused for years. And insurance companies and agents won’t always advise policyholders when they’re covered for less than the cost to rebuild. Another issue that has appeared in the aftermath of wildfires is insurance companies refusing to underwrite fire damage policies in high-danger areas. That’s happening in numerous mountain communities in California that were affected by wildfires, and it’s beginning to happen in Colorado.
NEW YORK ENDS DOG BREED DISCRIMINATION
If your family pet is a pit bull, a Rottweiler, a Doberman pinscher or a German shepherd, you may find yourself paying more for homeowner’s insurance or being denied coverage altogether. Now New York state joins Nevada as the only two states that have enacted laws to prohibit this practice. The vast majority of property insurance providers currently deny or significantly increase homeowner coverage and renewals for households with certain breeds of dogs in their homes. Past behavior is a much stronger indicator of current behavior than is genetics, so the New York legislation specifically reserves insurers’ latitude to cancel, refuse to issue or renew, or increase premiums for households in which a resident dog of any breed has a history of aggression. DID YOU
KNOW
?
40
WHAT’S DRIVING AUTO INSURANCE COSTS? ‘MORE’
The National Association of Mutual Insurance Companies looked into the factors contributing to auto insurance rate increases and found most of them are outside of the insurance industry’s control. In looking at what’s driving auto insurance rate hikes, NAMIC found the operative word is “more.” More drivers on the road than ever before. More distracted driving. More impaired driving. More expensive cars, parts and repair processes. And that’s just the start. The study also found more expensive medical care, more extreme weather, and more theft and fraud also contribute to insurance rate hikes.
QUOTABLE The U.S. experiences more tornadoes than any other country in the world, with up to a thousand reported every year. — Patrick Douville, vice president, insurance, with Morningstar
TELEMATICS GAIN FAVOR WITH AUTO INSURANCE CUSTOMERS
One auto insurance trend for 2022 is increasing acceptance of telematics among customers. That was one finding of the TransUnion 2022 Insurance Trends and Outlook Report. The report found that 32% of respondents said they had been presented with a telematics option for their auto insurance policy. Such programs can use connected devices, mobile phones or auto manufacturer car apps to monitor and report detailed driving behavior, and 49% said they opted in to the program. Insurance rates decreased for nearly half (48%) of those enrolled in a telematics program while staying the same for 30%. Overall, nearly two-thirds of consumers (64%) were “very satisfied” or “extremely satisfied” with their telematics experience, and 26% were “neutral.” In line with satisfaction rates, 64% said they are still using their telematics program.
33% of respondents said they would allow an insurer to install and monitor a connected device in their home. Source: TransUnion
InsuranceNewsNet Magazine » February 2022
Business Loan Indemnification DI When a bank lends money to a business, the lender will usually require the borrower to provide proof of disability insurance equaling the amount of the loan payments. The Business Loan Indemnification DI plan continues payments to the lender should the borrower become sick or hurt.
Petersen International Underwriters
(800) 345-8816
F
www.piu.org
F
piu@piu.org
MULTILINE
Now’s The Time For Clients To Think About Wildfire Threat The last several years have seen a dramatic increase in the number of buildings destroyed by wildfire. Why your clients need to start protecting their homes before wildfire season. By Adam Graham
W
ildfire is a constant threat to thousands of homes in many regions of the country each year. Due to the spontaneous nature of wildfire and its ability to spread not only through the natural environment, but also from home to home, homeowners must prepare for the worst-case scenario. With the exception of 2019, the last several years have seen a dramatic increase in the number of structures destroyed by wildfire, meaning the threat would appear to only be getting worse. I interviewed John Bailey, professor of silviculture and fire management at Oregon State University, and Randy Cowling, president of WASP Manufacturing, in order to understand 42
the best ways to protect a home from being destroyed by wildfire.
In Which States Are Homes Most At Risk?
First, it’s useful to be aware of where the biggest threats are being faced. Using statistics gathered from Headwaters Economics, we can see that many states are affected by wildfire in some capacity. Yet the overwhelming majority of structures destroyed by wildfire have been in California, with 59,987 homes or buildings
InsuranceNewsNet Magazine » February 2022
wiped out between 2005 and 2020, which is over 67% of all structures destroyed by wildfire across the country in the same time frame. Texas (5,252), Oregon (4,363), Colorado (3,158) and Washington (2,559) round out the rest of the five most affected states. However, it is worth noting that many thousands of structures have been affected across a great number of states. August is the month when wildfires are often at their peak. As of August 2021, California fire officials reported there were already
Cost to Install or Replace Siding
Source: Fixr.com
NOW’S THE TIME FOR CLIENTS TO THINK ABOUT WILDFIRE THREAT MULTILINE
Number of Structures Destroyed by Wildfire by State (2005–2020)
“The type of plantings is very important,” he added. “Eliminating cedars and other volatile shrubs and using plants and shrubs resistant to fire is of utmost importance. Prune limbs 10 feet from the ground on existing trees, and keep a space of at least 10 feet between mature trees and new plantings.”
Expert Advice For Communities
People can take many precautions when it comes to minimizing the risk of wildfires destroying their individual homes. However, one of the key ideas that Bailey of Oregon State promoted is that homeowners should work together as a community, especially those who live in houses on the edge of town or closest to fire-prone areas. “If none of those houses catches fire with all the heat and embers flying, then the whole neighborhood and community is more likely to survive,” he said. Taking care that not only is your own home is safe and protected, but others are also, can play a major part in reducing wildfire destruction. “It really speaks to the idea of neighbors talking about this stuff and helping each other — the most able helping others!” he added. Source: Fixr.com, Headwaters Economics - Structures Destroyed by Wildfires
465 homes destroyed and a massive 17,488 at risk, putting into perspective the rapidly increasing threat of wildfire.
How Do You Protect A Home?
The National Fire Protection Association has a checklist that homeowners should use to ensure their home is as well protected as possible. In order to avoid having a home destroyed by wildfire, homeowners are advised to take the necessary precautions. These precautions can include costly home improvements that involve replacing major structural features or more simple tasks such as cleaning and maintenance. Clean and maintain the home's exterior cleaning and maintenance. Embers igniting flammable materials aid in the spread of fire. Removal of things such as leaves around the exterior and in the gutters, mulch, piles of firewood and any object that can catch fire easily will be a vital step in ensuring the home’s safety. No items should be left under decks or porches. Replace and repair features. Any holes
in roofing, such as missing shingles, should be repaired to keep embers from entering the attic space. If the home is not made with fire-resistant materials, it is advised to replace these parts completely. Cowling advises homeowners that “special attention should be paid to roofing material, ventilation and the design and layout of surrounding gardens.” Mesh coverings should be placed on vents to stop embers from entering. Another major feature of the home that can be replaced is the siding. If the dwelling is made of wood or vinyl siding, it is worth considering flame-retardant alternatives, such as fiber cement or steel.
Landscaping
The exterior area of a home is a key factor in reducing the spread of fire. Therefore, experts suggest taking special care when it comes to landscaping. As Cowling pointed out, the layout of gardens is important. Trees should not be close to any structure and should be distant from other trees.
The Cost Is Worth Not Taking the Risk
Preparing a home to be less susceptible to wildfire destruction may not be cheap but may be worth it should disaster strike. Some projects may need to be carried out only once. These projects include things such as replacing siding, which carries a cost of anywhere between $7,500 and $22,500. Other projects, such as cleaning out gutters, should be done regularly. When completed by a professional, the cost of gutter cleaning averages between $150 and $225. Homeowners must factor in costs such as these when considering buying a home or making home improvements, especially when looking to buy or living in areas prone to wildfires. It is a necessity that could ultimately prove worthwhile when wildfire hits. Adam Graham is a construction industry analyst at Fixr.com. Adam may be contacted at adam.graham@ innfeedback.com.
February 2022 » InsuranceNewsNet Magazine
43
BUSINESS
‘Start Your Engine’ And Rev Up To Hit Your Goals Getting off to a strong start at the beginning of each day, each week, each month and each quarter will help you reach the finish line. By Sarano Kelley
P
icture this: You’re sitting in your NASCAR Gen-6 car nervously listening as the crowd cheers wildly with anticipation. As you and the other drivers slowly follow the pace car around the track, you’re ready! The pace car pulls over, the green flag waves, and with a thunderous roar, the race begins. Unfortunately, your foot slips off the gas pedal, and as you frantically try to regain your footing, the other cars are leaving you in their dust. Even though you may not be a race car driver, the analogy still applies whether you’re an agent or advisor. Your ability to succeed in business or in life depends on whether you achieve stable footing or 44
stumble awkwardly toward your goals. We all set goals, often at the first of the year or the beginning of the quarter, month or week. Some of these goals might include increasing your prospecting efforts, getting in better physical shape or increasing the number of contracts written. In the beginning, we’re energized by the desire to reach our goals. However, as life happens, distractions occur: phone calls from friends and family, emails or a golf date with a colleague. As our resolution diminishes, goals fall to the wayside, and again we find ourselves in a slump. The goal to start dieting or increase your prospecting efforts on Monday is no longer a priority by Tuesday or Wednesday. So how can you strengthen your resolve? How can you ensure you keep your foot on the gas pedal in order to win the race? The following are a few small steps you can take to help you “start your engine” each day and lead you on a path
InsuranceNewsNet Magazine » February 2022
toward achieving your business development goals.
An Energized Beginning
How do you begin your day? Do you jump out of bed with your engine revved? Do you enthusiastically embrace the demands of the day? Or instead, do you feel you never get enough sleep, and today is just another one of “those” days? There are two hormones that affect our sleep cycle — cortisol and melatonin. While cortisol raises our blood pressure in preparation for physical activity, melatonin helps us sleep. A balance of these two hormones is required for a good night’s sleep and to help us feel energized when waking. In my earlier years, I found myself getting up late in the morning already feeling behind and unfocused. Apparently, my hormones were out of sync. Trying to reach peak performance, I drank a lot of coffee to clear my mind — it didn’t work. Then a friend told me about an exercise
‘START YOUR ENGINE’ AND REV UP TO HIT YOUR GOALS BUSINESS program created by a doctor who recommended doing 100 pushups immediately upon waking to reduce the melatonin in the body. I thought it was crazy until I learned that exercise also delivers oxygen and nutrients to your tissues and helps your cardiovascular system work more efficiently. Additionally, it pumps up the endorphins, giving you more energy while reducing feelings of anxiety and depression. I gave it a try. Just like the doctor said it would, this intense early-morning exercise session made me feel better prepared
morning? Put it at the top of your list. Is it a client call that doesn’t require immediate attention? Place it accordingly. Many successful advisors put prospecting at the top of their daily to-do list. Whether it’s for 15 minutes or four hours, prospecting when your engine is revved can have a huge impact on the growth of your business. Once your activity calendar is created, you can start the day with a bang! As you check off the items you’ve completed during the day, you’ll find your spirits are elevated, and at the end of the day, you’ll
As you look at tomorrow’s checklist, categorize the items according to where they fall on your priority list. Is it a task that must be completed first thing in the morning? Put it at the top of your list. to attack the day. I became more engaged in business development, and my gloomy mood became brighter. I’m now a lifelong advocate of this approach. While 100 pushups might be pushing it for some of you, to “start your engine” I recommend you do at least 10 minutes of rigorous exercise first thing in the morning. Pushups can be done against the bathroom counter, on your knees or by any method that is doable for you. By doing this, you’ll find your desire to exercise later in the day is elevated and you have more control over the tasks at hand and your behaviors.
The Green Flag — Go!
Once your engine is revved, it’s time to start the day with both feet firmly planted. So what do you do first? Prospecting, phone calls, paperwork? To begin, I recommend you create a task list. This list should be a “living document” that you’ll add to and modify throughout the day. At the end of the day, separate the tasks into chronological order as to which ones need to be completed tomorrow, next week or next month. This will provide you with a to-do list for the next day. As you look at tomorrow’s checklist, categorize the items according to where they fall on your priority list. Is it a task that must be completed first thing in the
go home feeling a greater sense of accomplishment.
Accountability
You now have a formula for getting the most from every day, but adhering to it still can be difficult. A friend shared with me how she was having trouble sticking to her goal of a daily workout at the gym. I suggested she get a workout partner who could meet her at the gym each day. Having a partner to hold her accountable for being there worked. Now she arrives at the gym each day on schedule to avoid disappointing her partner. In addition, spending time with her exercise partner made the workout an even more enjoyable experience. Similarly, when I coach financial professionals, I encourage them to find a fellow agent or advisor to be their accountability partner. They are required to have a 5- to 10-minute conversation each day with each other to review their progress and talk about the successes or challenges they faced the previous day as they work toward their goals. Most agents and advisors who have done this have found that being held to task by an accountability partner helped them work harder and smarter. Plus they’ve had the added advantage of developing a strong bond that, in some cases, has lasted for years.
I suggest you find yourself an accountability partner. This should be someone who is committed to improving some aspect of their life — professional or personal. If one of your top goals this year is business development, you’ll find that having an accountability partner who is in the same line of work is beneficial. Not only can you share ideas for business development, but you can also discuss solutions to the hurdles you experience along the way. Set a time to talk or meet each day and then follow through. Also share the goals you have set with the significant people in your life, and ask them to check with you regularly to see how you are progressing. It’s amazing how much more motivated you can feel knowing that someone else is aware of the goals you’ve set for yourself. Once you reach your goals, give a big “shout-out” to the people who have helped make it possible. Remember the 80/20 rule — 80% of your outcomes are the results of 20% of your efforts. Applying this rule to your business, 80% of your daily accomplishments are produced during 20% of your workday. Surprisingly, that means only 1.6 hours of your eight-hour workday are spent on activities that produce most of your outcomes. I am confident your productivity will be increased substantially you implement these three strategies: 1. Start the day early and engage in 10 minutes or more of exercise. 2. Organize and prioritize tasks, and consider making business development a top to-do each day. 3. Align yourself with a fellow financial professional who will hold you accountable. Not only will you win the race against your competition, you’ll also be on the way to creating the life you’ve always envisioned. Enjoy the journey! Sarano Kelley, the co-founder of The Kelley Group, is a business coach, philanthropist and coauthor of The Game: Win Your Life in 90 Days. He may be contacted at sarano.kelley@innfeedback.com.
February 2022 » InsuranceNewsNet Magazine
45
INSIGHTS
The Million Dollar Round Table is the premier association of the world’s most successful life insurance and financial services professionals.
To Work With Next Generation, Retain Their Mom As A Client 2. Establish a trusted relationship. Look for common values, interests and acquaintances. Let her know about you and your family and share how you’ve helped others in similar situations — but keep the focus on her.
Female clients demonstrate more loyalty to their financial advisors compared with male clients, keeping their advisors when they feel valued and heard. By Michael S. Ross
W
hile our goal is to lead all our clients toward prosperous financial futures, it’s important to recognize that not all individuals — including women — have always benefited equally from these services. Despite our best intentions, female clients frequently have been ignored or excluded from the financial planning process for a variety of reasons. It’s on us as advisors to do our part to ensure they are actively included going forward.
Benefits Of Empowering Female Clients
In many cases, female partners of male clients have taken a back seat when it comes to financial planning. And while there are obvious reasons as to why this is problematic, it also poses a threat to financial advisors. Research from Transamerica shows that, after their spouses die, 70% of widowed female clients replace the family’s financial advisor with a more female-friendly advisor or turn to fellow widows for recommendations. This statistic highlights the need for advisors to actively engage with their female clients to ensure retention and protect their business in the event of a passing. On the other hand, female clients have demonstrated more loyalty to their financial advisors compared with male clients, with a Penn Mutual survey finding 72% of female clients never change advisors when they feel valued and heard. Women also tend to bring in more referrals — bringing in an average of 26 referrals over the course of their lifetime compared with an average of 11 referrals coming from men, according to CNBC writer Andrew Osterland. 46
Encourage questions and let her know you’re happy to follow up or talk again if she has more questions later.
It’s also important to recognize that women, who typically outlive men, serve as the gateway to the next generation. So if you want to work with the children, you need to retain their mother as a client.
Men And Women Have Different Financial Needs
Advisors must understand the unique challenges their female clients face and how these challenges impact their financial needs. Because women traditionally act as the primary caretakers, they tend to put in fewer years in the workforce. On average, men spend 40 years in the workforce, whereas women spend 27 years, according to SmartMoney. Financial advisors should be aware of this trend and recognize that female clients may have a deficit when it comes to saving for retirement. This disparity, along with the wage gap and the tendency for women to live longer than men, presents unique challenges for female clients. Financial professionals should be equipped to advise their female clients on how they can financially account for these variables.
How To Better Engage With Female Clients
1. Be a patient listener. Do the opposite of what previous generations of male financial professionals may have done. Listen more than you talk and don’t jump in with a solution.
InsuranceNewsNet Magazine » February 2022
3. Be a patient educator. Use straightforward language and less jargon. Understand that women tend to ask more questions than men do and may want details. Encourage questions and let her know you’re happy to follow up or talk again if she has more questions later. 4. Take things off her plate. She may be juggling her own work schedule, kids’ schedules, in-laws’ visits and 50 other things. If you can make the process of having a financial plan or buying insurance easier for her, she may appreciate that. Although some male advisors may fear that women prefer to work with a female advisor, research shows that’s not the case. According to the book The $14 Trillion Woman, 85% of women are gender neutral when it comes to choosing an advisor, with half of the remaining 15% preferring a male advisor. Like all clients, female clients want to be heard, understood and recognized for who they are. It’s on us to be better listeners and educators while being cognizant of the challenges women may have had when it comes to working with advisors. We must provide women with reliable and relevant information so they can make informed decisions about their financial planning. Michael S. Ross is a 17year MDRT member specializing in retirement, estate planning and financial planning for women. He is the owner of Cornerstone Financial Group in Lexington, Mass. Contact him at michael.ross@innfeedback.com.
INSIGHTS
Founded in 1890, NAIFA is one of the nation’s oldest and largest associations representing the interests of insurance professionals from every congressional district in the United States.
Political Advocacy: Equally Important Locally As It Is In DC If we are truly working in our clients’ best interests, we need to share this knowledge with our elected officials and other policymakers — on both the state and federal levels — so they make better-informed decisions.
E
By Dennis Cuccinelli
very insurance and financial services professional must be politically engaged and active. We should recognize it as part of our job description. We work with individuals, families and businesses in every community across the U.S., and we understand, better than anyone else, the financial needs and problems faced by our clients and how laws and regulations affect them. If we are truly working in our clients’ best interests, we need to share this knowledge with our elected officials and other policymakers so they can make better-informed decisions. Political advocacy is not just a way to promote our businesses; it is crucial for protecting our clients and ensuring that all Americans have access to needed financial products, services and advice. Misguided public policy can derail a financial plan as surely as a lack of proper guidance. Every advisor knows that state laws and regulations have huge impacts on their businesses and their success in serving clients. To make a real difference, effective politically involved insurance and financial professionals must be as in tune with what’s going on at the statehouse as they are with policies coming out of Washington. In my home state of New Jersey, for example, the New Jersey Bureau of Securities announced that it would not move forward earlier this year with a proposal that would have placed a uniform fiduciary duty on securities broker-dealers and investment advisors. This decision provides consumers
State laws and regulations have huge impacts on their businesses and their success in serving clients
in my state greater access to financial professionals and more choices when it comes to how they want to be served and how they want to pay for those services. It ensures that options remain available for New Jersey residents who might not have $250,000 or $500,000 or more in assets that fee-based advisors often require, or for many who are simply better served by the existing broker-dealer relationship. The bureau’s decision also helps to avoid a confusing and potentially contradictory patchwork of rules and laws by the different states and the federal government. But this result wasn’t created in a vacuum. NAIFA and NAIFA’s New Jersey chapter, along with the support of our industry partners, wrote and lobbied policymakers that the proposed regulation would have unintended consequences for the clients we serve.
Testifying On The State Level
I testified on behalf of NAIFA-New Jersey at a public hearing before the bureau that the U.S. Securities and Exchange Commission’s Regulation Best Interest enhances consumer protections without disrupting relationships between financial professionals and their clients. It also makes rules like the New Jersey proposal unnecessary. “We have always supported reasonable efforts to protect our clients from unethical behavior and predatory financial practices,” I testified. “A few years ago, it
was NAIFA-New Jersey’s efforts that supported the new law, one that granted the New Jersey Department of Banking and Insurance additional authority to discipline insurance or financial advisors.” But I made it clear that the current proposal would not have the intended effect for many New Jersey consumers. The bureau acknowledged these arguments by NAIFA and our industry partners in its press release announcing that the proposed rule will not be adopted. Our industry and the consumers we serve are better off because of it. The political advocacy role of insurance and financial professionals — especially at the state level — shows why active membership in associations like NAIFA-New Jersey and NAIFA’s other state chapters is so important. Our associations help us speak with clarity and authority as a single voice. A strong and growing association membership helps amplify our advocacy message and protect the best interests of the consumers we serve. Our work in New Jersey is just one illustration of how political advocacy by insurance and financial professionals can make a real difference on behalf of our industry, our clients, and consumers. Insurance and financial professionals are serving their clients’ interests by working with policymakers in state capitals nationwide, from Sacramento to Albany, from Austin to Boise, and everywhere in between. I truly believe it’s a vital part of our calling as professionals and servant leaders. Dennis Cuccinelli, LACP, of Paramus, N.J., is a member of the NAIFA National Board of Trustees. He is also a past president of NAIFA-New Jersey. He may be contacted at dennis.cuccinelli@innfeedback.com.
February 2022 » InsuranceNewsNet Magazine
47
More than 850 financial services companies in more than 70 countries turn to LIMRA first to help them build their businesses and improve their performance.
INSIGHTS
Insurers Face Challenges With Acquiring Talent In 2022
?
Nearly a half-million workers in the finance and insurance sectors left their jobs during the pandemic. How can the industry compete in the war for talent? By David Levenson
C
OVID-19 upended much of our lives over the past two years. The pandemic has prompted people to reexamine their priorities and needs at home and at work. One of the consequences has been the “Great Resignation,” with more than 20 million Americans quitting their jobs last year between June and October, according to the Bureau of Labor Statistics. This number includes nearly a half-million workers in the finance and insurance sectors. Along with other changes brought on by the pandemic, this trend has made it much more challenging to not only entice employees to an organization but also keep them once they join.
Hybrid Is Here To Stay
One of the most significant changes brought on by COVID-19 is the shift to remote and hybrid work. This is not likely to change as the pandemic fades. According to a recent study by LIMRA and EY, six in 10 U.S. employers say a substantial proportion of their company’s workers will continue to work remotely at least some of the time in an effort to attract and retain skilled employees. This is also true in the life insurance industry. A separate LIMRA survey finds half of life insurers say at least 20% of their workforce will remain 48
full-time remote following the pandemic. And, most companies have implemented hybrid work schedules for the majority of employees. Beyond the logistical and technological challenges of a hybrid workforce, our research also uncovered that this transformation will impact company culture and how companies get work done. Companies will need to train their leaders on new and different ways to support employees and leverage technologies in order to create the greatest efficiencies and engagement.
Beyond flexibility, employees are demanding more. Compensation is clearly rising, but workplace benefits — especially nonmedical benefits — also will play a key factor in attracting and retaining talent. A recent LIMRA study finds three-quarters of employers (76%) believe their workers will demand a wider variety of benefits options in the future, and seven in 10 midsize and large companies expect to offer a greater number of benefits over the next five years.
As Talent Needs Shift, Talent Strategies Must Change
The team at LIMRA and LOMA understands that our member companies’ success is highly dependent on the capabilities of their talent. In 2022, we will launch an industrywide initiative to examine the many factors contributing to the talent disruption affecting our industry; identify the strategies that have been most successful in recruiting and retaining key talent; and provide actionable insights that will empower companies to lure the talent needed to be successful. We look forward to sharing the results with all of you.
Pre-pandemic, the life insurance industry was already grappling with a need to innovate digitally. Two-thirds of life insurance executives surveyed said embracing digital innovation would be most important to the future of work in the industry. To accomplish this, insurers will need to get new types of workers — including data analysts, actuaries and technology professionals. Insurers also will need to up-skill and re-skill current employees to capitalize on the capacity made available by the elimination of manual processes. This year, as companies compete for employees, it will be critical that they leverage the new freedom remote work allows to source the very best and most diverse talent, regardless of geographic location. Even for local employees, flexibility will be more important as there is greater demand to work from home. If your company doesn’t offer flexible work schedules, many workers will seek employment with companies that do.
InsuranceNewsNet Magazine » February 2022
Planning For The Future
David Levenson is president and CEO, LIMRA, LOMA and LL Global. He may be contacted at david.levenson@innfeedback.com.
Like this article or any other?
Take advantage of our award-winning journalism, licensure and reprint options. Find out more at innreprints.com.
INSIGHTS
With nearly 100 years of experience, The American College is passionate about helping students expand their knowledge and opportunities as financial professionals.
Consider Series I Savings Bonds The rise of inflation has made government-backed savings bonds an attractive investment. By Colin Slabach
O
ver the past 20 years, a 60/40 portfolio has yielded a nominal rate of return of roughly 8%. In the past 10 years, the rate of return was 11%, and one year it was around 18%. However, times may be changing. Research conducted by Bank of America and EPFR Global found investors poured almost $900 billion into exchange-traded and long-only funds in 2021, which exceeds the previous 19 years combined! The Federal Reserve has also changed its stance on inflation, claiming it may not be as transitory as initially anticipated. Whether permanent or transitory, the rise of inflation has made government-backed Series I Savings Bonds an attractive alternative to riskier corporate bonds and low-yielding certificates of deposit.
Series I Savings Bonds (7.12%)
An I Bond is an interest-bearing, non-marketable U.S. government savings bond offered directly through the Treasury. Until the end of April, they are offering a whopping 7.12% annualized rate of return for the next six months. A reasonable question is how and why the federal government is offering a risk-free interest rate of 7.12%. The interest rate has more to do with the Consumer Price Index for all Urban Consumers (CPI-U) for all items. The Treasury determines the interest or composite rate based on two factors: inflation (CPI-U) and a fixed rate. Currently, the fixed rate sits at 0%; however, the semiannual inflation rate is 3.56% (7.12% annualized). The 3.56% semiannual interest on government-backed securities is unheard of in today’s environment. For comparison, six-month FDIC-insured bank CDs’ annual percentage yields are roughly between 0.50% and 0.80%. However, the bonds
must be purchased before May 2022, which is when the new composite rate is determined. Fortunately for Series I bonds and unfortunately for almost all other assets, inflation will probably remain high for the duration of 2022.
Annual Contribution Limit ($10,000)
A major limitation to I Bonds makes them less attractive to wealthier individuals. There is a $10,000 limit per person per calendar year. Those who were fortunate enough to buy I Bonds in December are again able to buy another $10,000 in January, locking in $20,000 at the current rate for the next six months. The limit is per person, which puts large families at an advantage, as accounts for minors are available. Another way to extend the $10,000 limit is by directing up to $5,000 of one’s income tax refund toward purchasing what are called paper I Bonds. It can be more complicated, but it does increase a family’s contribution slightly. The $5,000 limit is per tax return and not per person.
Taxation
An I Bond’s interest payments are subject to federal income taxes but not state and local taxes. They are also subject to federal estate, gift and excise taxes, as well as state estate or inheritance taxes. The Series I Bond owner can choose when they would like to report interest. The options include reporting interest every year or when one of the three triggering events occurs: 1. The owner redeems the I Bond and receives both principal and interest. 2. The individual gives up ownership of the I Bond, and the I Bond is reissued. 3. The I Bond stops earning interest because it has reached final maturity (30 years).
Redemption Rules
The redemption rules are as follows: » Must hold the I Bond for at least 12 months unless there is a federally declared disaster.
» After 12 months, any bond redeemed before five years loses the last three months of interest. » After five years, interest and principal are redeemable at face value. The illiquidity for 12 months, combined with the unknown preceding six months of interest, could make some individuals uneasy about I Bonds — especially those who prefer guaranteed FDIC-insured investments. However, even if the CPI-U turns negative for the May 2022 adjustment, the composite rate for the next six months won’t drop below 0%. Therefore, the redemption after 12 months will still provide a 3.56% annualized rate of return (3.56% for the first six months and 0% for the next six). The loss of the three months of interest after the initial 12 months of illiquidity becomes a moot point if the CPI-U turns negative and I Bonds’ six-month interest rate is 0%. Giving up three months of 0% interest is still zero! The non-seasonally adjusted CPI-U has led to a much higher composite rate for I Bonds. However, the inflation rate, specifically for energy and used cars and trucks, may stabilize, suggesting the composite rate determined May 1, 2022, will be lower. Even if the composite rate is lower in the second half of 2022, a couple still should consider contributing $10,000 each to I Bonds’ as they will outperform CDs over the next 12 months even if the rate drops to 0%. The $10,000 limit is low; however, it is per person per calendar year. Minor accounts can be set up through the Treasury Direct website for children, allowing parents to contribute on their behalf, leading to a much larger family contribution. The tax deferral, the pure inflation hedge and the backing by the full faith and credit of the U.S. government make it an excellent investment vehicle for individuals who want to maintain their purchasing power over time. I bonds can be purchased through the Treasury Department website, www.treasurydirect.gov. Colin Slabach, MS, ABD, is assistant professor of retirement and assistant director of the Retirement Income Center at The American College of Financial Services. He may be contacted at colin.slabach@ innfeedback.com.
February 2022 » InsuranceNewsNet Magazine
