The following are suggested applications to discuss Annuities.
Apply stencils and financials on the Asset-Map.
Model Retirement Target-Map longevity. Take the end age of the plan to 100 years as mortality age.
How much is funded by guaranteed sources? Use mouse-over on the Target-Map funding bar to show percentage of funding from cash flows (potentially more secure) and assets (potentially less secure).
On the Asset-Map
Apply financial tiles that represent annuity assets and/or annuity cash flow. These will represent their current annuity value as well as an annuity cash flow that you determine as either being available today or in the future, depending on how you wish to position the conversation with your client. Below is an example displaying a current annuity asset and a future annuity cash flow.
Select to add an Asset and/or add a Cash flow from the Actions menu.
Define the asset or cash flow
Select the type of asset or cash flow from the Type drop down menu
Choose the interested member
Enter a name for the financial and where it is located
Enter a value
Ensure the annuity check box is checked on the asset prior to saving the edits. Cash flow financial does not have a check box.
You can also choose to use the Building Blocks Stencil, specifically the Retirement Plans option and apply it to a household member. This applies a few Annuity-related financials (as well as other retirement topics) quickly to be edited and saved by the advisor.
On the Target-Map
The financials from our example above are listed here on the Target-Map's, What you Have page below.
This image illustrates the Present Value Equivalent (net of COLA and Loss to Taxes) of the future cash income stream when the Expected Net Return on Capital (net of fees and expenses) is set at 5%. 👇
The next image illustrates the Present Value Equivalent of the future cash income stream when the Expected Net Return on Capital (net of fees and expenses) is set at 3%.
As you can see, the Asset is already at current value (net of taxes) and therefore there is no change here when the rate has been adjusted. 👇
This scenario illustrates that low return assumptions make guaranteed cash flows more valuable.
If your approach is around the idea of providing more income certainty in retirement, this may address the client's emotional anxiety and behavior-based decision-making in a riskier environment. Some industry resources have determined that if the client has 50% to 70% core living expenses covered by guaranteed sources, then feelings of anxiety are lower and their quality of life is improved.
Tags: retirement, annuity, income, GMIB
7/2024