The 4% Withdrawal and Guaranteed Income

This has been a tremendous year for the annuity industry and there are several reasons why this is the case. High interest rates allow carriers to provide stellar caps, participation rates and premium bonuses. This high-interest rate environment also allows carriers to be extremely competitive in the guaranteed lifetime income space.

For decades, financial advisors have been telling clients that they can safely withdraw four percent of their account value each year and have a “good chance” of not outliving their account value. While this rule holds true in good times, it can be devastating to unlucky folks who happen to retire during a market downturn.

We are insurance agents, safe money masters and have the shield and weaponry to protect our clients’ nest egg and one powerful weapon is the GLWB (guaranteed lifetime withdrawal benefit) rider.

Throughout all the turmoil in the economy, political uncertainty, trade wars and inflation, the equity markets have been resilient. The S&P 500 is nearing all-time highs as of this writing and the GDP for Q2 came in revised to 3.3%. To the naked eye, all seems calm.

However, we all know that market resiliency will eventually subside, and your clients are likely to think the same thing. Retirees and those close to retirement have lived through the dot com bubble, the 2008 financial crisis and the 2020 pandemic which caused a significant downturn in the equity markets. These folks need guarantees – not maybes.

With the power of the fixed index annuity and the GLWB, your clients can rest easily, knowing they don’t have to worry about the equity markets at all. They will feel safe and sound knowing they have a guaranteed income for life. Oh, and that four-percent withdrawal? That is nothing compared to the 6, 7 or 8 percent withdrawals our GLWB’s provide.

These income riders also provide a hidden benefit – the chronic illness “doubler”. Yes, most of you are aware of this feature. However, for those that aren’t familiar, most income riders come with an enhanced income benefit that will double income payouts if the client develops a chronic illness or has to go to a nursing home.

The time to conduct a periodic review for your client base is now. Same goes for connecting with prospects that never moved forward. Let us help you with these meetings. Give us a call or book an appointment and together we can put a plan together that will make you look like the hero.
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As I end this commentary, the old saying rings true when it comes to income planning – what’s old is new. Over the past 20 years in this business, many things have changed. The one thing that has not changed is the retiree’s need and desire for a guaranteed income that they cannot outlive with a hedge against long-term care costs to boot.

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Until Next Time – Good Selling! 

​Joseph R. Ohlson LUTCF
President
1-877-844-0900
[email protected]