In turbulent times, lifetime income plans make sense on an emotional and sound financial planning basis.
Scant time is left to plan for a tax hike no one can stop. That is the increase caused by the Patient Protection and Affordable Care Act, surtaxes on dividends, rental income and other passive income. Deductions are being stacked to make them less attainable by the middle class and seniors.
This is coming at a time when talk of the debt ceiling will dominate the headlines, the Bush tax cuts will either be extended or allowed to expire, inflation and so much more confront our retirees and future retirees.
How do guaranteed income plans fit in the equation? They fit perfectly on an emotional and sound financial planning basis. Most clients will tell us it hurts more when they lose money compared to the excitement of when their accounts gain value. Many also tell us the earnings they receive do not alter their lifestyle, especially those nearing retirement.
Stuck in a rut
Yet as advisors we are stuck in the rut of preaching return, and to be clear it's an assumed rate of return—emphasis on the assumed. We have no idea what the market will do, let alone what a diversified portfolio or capped product will do. Yet we try to plan for their lifetime income and their ability to survive on these types of returns.
