Page 14 - Investment Advisor - December 2023

reTIremeNT/ANNuITIeS PlANNING

How far short did the client run at that
time? Would it be a devastating failure The other key consideration is to ask
or a minor inconvenience?
The other key consideration is to ask whether it is really a “successful” retirement
whether it is really a “successful” retire-
ment if clients are petrified of spending if clients are petrified of spending and end
and end up following a very conservative
plan with a 100% success projection. up following a very conservative plan with a
This could mean they end up leaving a
large bequest — either to a spouse, chil- 100% success projection.
dren or the government via estate taxes.
“Is that a good thing? Is that even what
you’re looking for?” Hopkins asked. years of inflation-adjusted annual with- As a simple baseline, if clients expect
drawals that could likely be sustained to make it 30 years in retirement, and
WHAt Is tHe rIsk AdJUsted in a given situation, and then they are their withdrawal plan is projected to
CoverAGe rAtIo dividing that number by the anticipated cover all 30 years without leaving any
In the paper, Estrada defines this con- length of retirement for the individual leftovers, that would provide a “1” value
cept using a few terms. Essentially, the client, given their health status and lon- for their coverage ratio. On the other
advisor is taking the projected number of gevity expectations, Hopkins explained. hand, if they assume that their retire-

This Tool to Keep Clients From
Going Broke in Old Age Looks More
Attractive Than Ever, Advisor Says
Joe Opiela, wealth advisor and vice president of strategic
partnerships at Schechter Wealth in birmingham, mich.,
is alerting financial professionals to the fact that some of
the ancillary effects of higher interest rates haven’t been
fully considered: this includes the issuance of annuities,
especially qualified longevity annuity contracts, at attrac-
tive payout rates that haven’t been seen in the better part
of two decades.
“One really exciting area is QLAcs,” Opiela recently
said in an interview. “this is a topic that should be
known by all advisors, especially in the mass affluent
space.” As he explains, QLAcs themselves aren’t a
new product.
back in 2014, the u.S. treasury enabled the purchase
of deferred income longevity annuity contracts inside of 401(k) “the second factor is the changes made by the Secure Act
and traditional individual retirement accounts, thereby letting 2.0 legislation, which as your readers may know, specifically
consumers use what is usually their largest retirement savings addressed the QLAc maximums.” Previously, only the lesser
vehicles to make an annuity purchase. What is new, Opiela of 25% of the aggregate account balance or $145,000 of the
says, is this interest rate environment, and the current situation client’s qualified retirement funds could be deployed toward
in the markets makes QLAcs and other annuities look more a QLAc, but that amount has been raised to $200,000. As
attractive than they have in decades. before, investors can purchase QLAcs that kick in with income
According to Opiela, reconsideration of QLAcs is timely for starting as late as age 85.
three main reasons. “One, as interest rates have risen dramati- As Opiela notes, the third factor to consider is the big chal-
cally, annuity payout rates are better than they have been in at lenge of addressing increasing longevity — which is a particu- Adobe Stock
least 15 years, if not longer,” he says. lar concern for those who are in the mass affluent and high-

12 Investment AdvIsor December 2023 | ThinkAdvisor.com