The retirement landscape has changed, and the old strategies may not be enough to safeguard your clients’ retirements.
Have you ever heard the saying, “Whatever got you here, won’t get you there?” That’s a good way to describe the current state of retirement income planning: 20 years of equity growth has allowed us to create portfolios that produced sustainable income. But with interest rates still near historic lows and equity markets at towering highs, some of the most trusted income strategies of the past might pose challenges for the retirements of today’s clients.
Until 10 years ago, a 60/40 balanced portfolio could produce a 4 percent “safe return rate,” but in the current environment, that safe rate is likely under 3 percent.1 Today, only 18 percent of Americans can depend on pensions for income within retirement, and the 0.3 percent COLA for Social Security in 2017 will likely get wiped out by increases in Medicare premiums.2 Add to that increasing lifespans, and you’ve got less income, but with more years of retirement to spend it.
If I were a client, I’d want to know I have a plan in place that considers this landscape. After all, most clients don’t want to hear about portfolio failure rates and bond returns – they want to know how they can maintain their lifestyle in retirement. And you want to be able to reassure them they won’t have to lower their expectations.
Fortunately, there are other options besides adding more risk to clients’ portfolios, explaining portfolio failure rates and suggesting clients withdraw savings at lower rates. In fact, take a look at the latest ways Lincoln is helping you solve your clients' retirement income needs. Contact a Lincoln representative to learn about these changes and how they help you add more certainty to clients’ portfolios with guaranteed lifetime income.
Enhanced growth and income options
- 70/30 investment options with Lincoln Market Select® Advantage
- 5% joint life and 5.25% single life income at age 65 with Lincoln Lifetime IncomeSM Advantage 2.0 (managed risk)
1David Blanchett, Michael Fink and Wade Pfau. "Low Bond Yields and Safe Portfolio Withdrawal Rates." Morningstar, January 21, 2013.
2Dupont, Deb “Focus on Defined Contribution Plans: Role in Retirement Saving and Security.” LIMRA, 2014. http://www.limra.com/Research/Abstracts/2014/Focus_on_Defined_Contribution_Plans___Role_in_Retirement_Saving_and_Security_(2014).aspx?LangType=1033
About the author
Michael R. Harris, CFP®, CLU®, ChFC®, CFS®, CES®, is vice president of Sales for Lincoln Financial Distributors. Since 1999, Mike has helped financial professionals gain a better understanding of the challenges and opportunities surrounding income distribution planning. He joined Lincoln in 1990 as a securities trader and led the creation of the bond trading desk. In 1992, Mike transitioned into a Regional Life Marketing Director in support of Lincoln’s life insurance products and soon after began working closely with American Funds Distributors to start Lincoln’s American Legacy sales team.