Top Year-End Sales Tips to Serve and Grow Your Business

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The end of the year can be a great opportunity to touch base with your clients and jointly reflect on their retirement goals, determine if they are satisfied with their current plan or would like to make revisions. There are also steps they can take to not only help improve their tax position for this coming year, but good practices for the years ahead.

A New Approach to Annuities

A client’s life circumstances may have changed over the past year, so as the last months begin to wrap up, it can be a good time to check in. Marriage, birth of a child, a move or a new job can create a need to reevaluate their plans for retirement or update their beneficiaries.

Along with supplementing retirement income, annuities can offer additional value. They may be able to help prepare for future life events, even those that are unexpected, and provide a little peace of mind.

Preparing for the Unexpected

When planning for the future, unexpected events like extended illness or injury can be difficult scenarios to consider. If these situations do occur, they can be stressful and costly for your clients. Annuities can be used not only to supplement a client’s retirement, but also to increase their income if they are confined to a care facility or become seriously ill.

The approximate average annual cost of a staying in a qualified care facility is $70,000 and 40% of people 65 and older will likely need to enter such a facility.1

Several annuities contain waivers that can trigger payments when someone enters a nursing home or becomes disabled. Nursing home and terminal illness waivers can waive surrender charges when the annuitant needs to access their money most.

Confinement income benefits can also be a great selling point of annuities. These features can double or triple income payments to help supplement the cost associated with a qualified care facility. Most of these benefits have a maximum time period or continue until the accumulated value reaches zero. Any such limits on benefits should be discussed in detail with your clients.

Annuities with Guaranteed Lifetime Withdrawal Riders (GLWRs) sometimes can boost the guaranteed lifetime income payment if a client is confined to a care facility and certain long-term care qualifications are met. These GLWRs do not require underwriting and the long term care benefit cost is built into the GLWR itself. Typically the lifetime income amount is increased 50-100% when the conditions are met.

Annuity GLWR benefits might deliver some otherwise neglected funds to cover LTC expenses. Stand-alone LTC sales declined 23% in 2009 and have declined annually since then.2

Long -Term Care (LTC) annuities, also sometimes referred to as hybrid annuities, are like a deferred annuity, but offer an increased payout, typically equal to 200 or 300 percent of the face value of the annuity, if the annuitant needs LTC and the contract’s requirements are met. Installment payments may continue for a fixed period, or, if an optional rider is purchased, payments for LTC can continue for the rest of the annuitant’s life.

For example, a 60-year-old client purchases a $50,000 annuity with long-term care benefits with a 200 percent coverage maximum and six-year benefit period and names himself the annuitant. His initial long-term care coverage maximum would be $100,000 – double the premium paid. If this person never needs long-term care, then the annuity’s accumulated value can be withdrawn at the end of the surrender charge period — or it can be left to accumulate further interest and the policy will remain enforce.

Sudden illness or diagnosis is unplanned and unexpected. Annuities with such features can help provide your clients with peace of mind that they will have income to help with potential expenses in the years ahead.

A New Annuity Audience

With the uncertainty of Social Security income, shrinking of 401(k) balances and decreasing number of pension plans, planning for retirement for younger generations may require taking a new approach.

Retirement Income for Generation X

Gen X individuals are characterized as being born between 1965 and 1980. In 20 years when the oldest of Gen X is beginning to retire, what will they turn to for retirement income? Baby boomers will be well into their retirement years and fewer workers will be paying into Social Security.  How are the Gen X individuals going to fund their golden years?

Annuities are no longer being labeled as an “older person” retirement product. They could potentially provide more of a benefit for the next generations than for those people reaching retirement now. Annuities can be valuable with their combination of principal protection, locking in interest credits, and tax deferral as long as no withdrawals are taken during the surrender charge period.  So a 30 year old who starts his or her annuity today could be compared to building on a 401(k) over many decades.

Clients of Gen X are on track to replace an average of just half of their salary.3 Having bouts with economic and financial uncertainty, this group tends to be more financially conservative, emphasizing saving and spending prudently. These clients are also generally more skeptical about money-related issues and about whether they will end up doing as well as their parents did financially.4

Many younger employees are looking for greater long-term financial security and a plan that will help them ensure they do not outlive their money.

1 in 4 fixed annuity buyers are under age 50

1 in 6 indexed annuity buyers are under age 50.5

Although retirement is years away, it is important for this group to begin planning early. It is anticipated their average retirement age will be 64, indicating a retirement period of more than 20 years, since life expectancy of Gen Xers may be over 87 years old.6 They will need an income solution to address the longevity ahead of them and a strategy that can help them live comfortably during those golden years. Plus, by building a trusted relationship now, these clients may seek your guidance for many years. As they transition into retirement, they may need additional insurance products to meet their changing needs.

A hypothetical example is a 35-year old client who begins a new job after a ten year position with her previous company. During those ten years, she contributed to her 401(k) and took advantage of her employer’s match. Upon leaving, she had $100,000 accrued. She consults her financial professional on what to do with this amount, and after a discussion, they take $10,000 of the total and put it into a fixed indexed annuity with income rider.

By the time she begins taking income at age 65, her benefit base will have grown to $27,500. By putting a small portion of her assets into a fixed indexed annuity, she can experience a steady, conservative growth and could receive $1856 annually beginning at age 65, and for the rest of her life.

If she lived until she was 95 years old, she would receive a total income of $55,680 over that 30-year period of taking income. This is now just a portion of her total 401(k) portfolio and she has an additional $90,000 she could invest or put into other retirement products.

Education will be important to raising awareness about the options for Gen X clients and showing them how to address their challenges, meet their goals and hopefully restore their confidence in their financial future.

This target market traditionally gathers information through the internet, social media and online reviews. To reach this audience, it requires a shift from traditional marketing practices and utilizing a variety of mediums as a way to inform, form a connection and ultimately make the sale.

Improving Year-End Tax Position

Rather than putting tax planning at the bottom of the agenda, clients can start thinking about ways to gain tax advantages by reviewing and taking deductions now. Tax planning decisions can be made today, and over the next year, that can give individuals and businesses more leverage no matter the changes in the financial landscape.

Organize Tax Records Early

In preparing for this year’s tax filing, it’s important to organize tax records including year-end investment statements, capital gains and losses from asset sales, transaction records from real estate transactions, interest and dividend records for the year (1099s), payroll and withholding statements (W-2s), records corresponding with deductible expenses such as property taxes and insurance, business income and expense records. Encourage clients to speak to their tax professional if they need assistance.

Review Insurance Coverage

At least once each year, it’s good for individuals to gather insurance records together and review the adequacy of insurance policies. Evaluating all coverage, including life insurance, disability income insurance, homeowners insurance, auto insurance, liability insurance, renters insurance, long-term-care insurance, etc. can be a useful exercise.

Review Plan for Retirement

An end-of-the-year meeting can be a great time to revisit a client’s plan for retirement. Useful questions to help your clients determine if they are still on track are:

  • 4  Does your will reflect your personal wishes for the distribution of your assets?
  • Have the personal or financial circumstances of your beneficiaries significantly changed over the past year? Do you need to add or change anyone?
  • Would you want to consider a gifting program to move assets from your estate to those you wish to enrich?
  • Have you reviewed your estate plan in light of changing estate tax laws or changes in your personal financial position?

Deferring Income

Income is generally taxed in the year it is received – but why pay tax today if a client can pay it tomorrow instead? It may be difficult for employees to postpone wage and salary income, but they may be able to defer a year-end bonus into next year – as long as it is standard practice in their company to pay year-end bonuses the following year.

If a client is self-employed or does consulting work, they may be able to delay billings until late December to ensure that they won’t receive payment until the next year.

Last Minute Tax Deductions

Just as some people may want to defer income into next year, they also may want to lower their tax bill by accelerating deductions this year. A donation to a registered charity can help reduce taxes on a personal tax return.

You can also encourage clients to speak to their tax professional on how they can potentially maximize the tax benefits of their generosity by donating appreciated stock or property rather than cash. As long as they have owned the asset for more than one year, they get a double tax benefit from the donation. If the person is 70½ years or older, they can make a donation directly from their IRA, which allows them to offset taxable income.

Contribute Maximum to Retirement Accounts

Clients can try to increase their 401(k) contribution so they are putting in the maximum amount of money allowed. If they can’t afford that much, they can at least contribute the amount that will be matched by employer contributions.

Clients can also consider contributing to an IRA. The sooner they put money into the account, the sooner it has the potential to start to grow tax-deferred. Making deductible contributions may also reduce their taxable income for the year.

Monitor Flexible Spending Accounts

Flexible spending accounts, also called flex plans, are benefits offered by many companies that let employees pay medical costs from this account. The advantage is that the money that goes into the account avoids both income and Social Security taxes. Each person decides at the beginning of the year how much to contribute to the plan and are required to use that amount by the end of the year.

1Source:, 2013.

2 Individual Long-Term Care Insurance (2009 Annual Review), LIMRA, Karen Fisherkeller, March 4, 2010.

3 Pew Charitable Trust report, 2013.

4 Financial Finesse Reports: Generational Research, 2012.

5 StanCorp Financial Group, Inc., 2013.

The examples provided are hypothetical only, actual results may vary. Waivers may not be available in all states and are subject to limitations set forth in the contract. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please encourage your clients to consult with a professional specializing in these areas regarding the applicability of this information to their situation.

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