As widely reported in recent years, the number of U.S. workers covered by pensions continues to decline.
But it's likely that some of your clients who don't have pensions and must rely solely on defined contribution plans, such as 401(k) accounts, would still benefit from a guaranteed lifetime income. In those cases, one approach is to create a personal pension, which is the subject of the book, "Pensionize Your Nest Egg: How to Use Product Allocation to Create Guaranteed Income for Life" (Wiley, 2015) by Dr. Moshe A. Milevsky and Alexandra C. Macqueen, CFP.
Many people undervalue a pension's benefits, Macqueen notes, because they misjudge the key financial risks retirees encounter. "What's the real risk of longevity?" she asks. "What's the real risk of inflation? What's the real risk that you have a poor market experience early in retirement and it permanently reduces how much you can take out of the portfolio?"
Ways to grow with clients: A Silo Approach
A central theme in the book is the authors' use of what they describe as "silos" to shift the focus from the usual asset-based, retirement-portfolio allocation discussion toward a product allocation. It's an interesting approach and the silos consist of immediate income annuities, traditional investment portfolios and variable annuities with guaranteed living income benefits.
