Significant future trends rarely signal themselves as overtly as the oncoming “senior revolution.” There is also no doubt that the “aging of America” has a profound impact on the nation’s economic environment — from saving to spending, from housing to health care, and more. These dramatically changing demographics represent extraordinary marketplace opportunities for anyone in the insurance business. Now is the time to seriously consider positioning your business to respond directly with the needs of the senior sector.

The key to successfully serving this generation of 71.5 million people, who will soon control the lion’s share of the wealth in this country, is to recognize that most baby boomers are not interested in pursuing a traditional retirement of leisure. Market research shows that a large segment of this highly educated, goal-oriented generation indicate that the need for continued mental stimulation and challenge — much more than financial concerns — will motivate them to continue to seek various degrees of active employment throughout their retirement years. At the same time, boomers will spend significantly more time in retirement than their ancestors. Today, a 65-year-old stands a better than 50% chance of living to at least 85 and a 30% chance of reaching 90, according to a MetLife study.

By rejecting traditional retirement, living longer and better, and choosing to work or cycle between work and leisure, baby boomers will reinvent retirement — a fact that has profound implications on the insurance and annuity products that will be appropriate for this generation of clients. Boomers will extend their earning, saving and investment compounding years far into their retirement. In addition, many will not have to utilize retirement savings as their primary source of income until much later than current planning models indicate.

To develop an effective strategy for penetrating the booming senior marketplace, begin by asking yourself questions such as: What are seniors’ highest priority financial needs? What products and services can I offer that best address these needs? How do I orient my business to make significant inroads into this market?

This article is adapted from The Professional’s Guide to Financial Services Marketing: Bite-Sized Insights for Creating Effective Approaches (Wiley Publishing), by Jay Nagdeman. For more information, visit www.SuasionResources.com.    

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• • 2/25/2010 5:08:04 PM
  • R. Scott Thevenot
  • Roth Conversions - A Misplaced Focus?
  • With most of the industry’s attention regarding IRAs (Individual Retirement Accounts) being on converting from traditional to Roth IRAs, the more critical issue might be that many of the over fifty million retirement plan holders may not economically survive retirement at all. Total U.S. retirement asset values are down over 20% in the last two years. With interest rates at historic lows and inflation and taxation on the rise, I would think that the primary objective should be on educating plan holders on the profound effect that these variables have on their plan balances and future income streams. Retirement assets are, by their very nature, self depleting. By that, I mean that plan owners will begin some kind of amortization process at retirement. Whether they own a traditional account, a Roth or both, these funds will more than likely be consumed by most owners during retirement. The Investment Company Institute’s 2009 Investment Company Fact Book, sites that over $390 billion of IRA deposits were held in bank and thrift accounts at the end of 2008. According to Bankrate.com,the average Jumbo IRA Money Markets APY is less than 1.10% as of 01/20/2010. Plan owners need to understand that without careful and well thought-out planning now, they could very well find themselves with less income in later years than at the beginning of retirement. Consider the following traditional plan owner who has a $100,000 plan balance and will begin taking required minimum distributions (RMDS) at the end of the year. A 25-year amortization of the plan, calculated at a 1.8% APY, shows that, at age 94, the RMD will be $3,689, which is less than the $3,716 RMD taken in the first year. The IRA plan’s balance at the end of 25 years will be down to less than $30,000. If we contrast these values with an APY of 3.8%, the age 94 RMD of $6,000 will be more than the $3,789 RMD taken in the first year. Also, the plan’s balance at the end of 25 years will be more than $48,500. Taking on the risk required to earn another 2.0% can mean tens of thousands in additional retirement benefits. Most people wouldn’t take out a mortgage without a detailed amortization schedule being provided. Why, then, wouldn’t they want one for their IRA? The focus should be on educating retirees on the management of their qualified plan balances and income streams, by providing and comparing IRA amortization schedules that reflect the profound difference just a few percentage points in rates of return can have on their plan values. Conduct a web search for “IRA management software” (including quotes) to find software programs that provide traditional IRA planning tools,or go to www.maxmyira.com Qualified plan owners who are near or at retirement and have estimated marginal tax rates above 25% should consider that the break- even point of a Roth IRA conversion may exceed life expectancy. Conduct a web search for “Roth conversion software” (including quotes) to find software programs available that can make the determination if a conversion is the right course of action.

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