How does the Rule of 100 effect your clients?

The article, “Rethinking the Shift-to-Bonds Strategy” from Bloomberg Business points out that “Low Rates and Longevity alter rules for retirement”. If you have relied on using the Rule of 100, the rule that take the clients age and uses it to determine the amount that should be in Bonds or fixed income assets, then based on the current low interest rate environment you may need to reconsider the amount of income you may have in retirement or you may need to reduce your bond or fixed income allocation percentage.

The article illustrate a New Jersey couple, ages 51 and 53 looking for $80,000 of income from their $1,000,000 nest egg. If I illustrate the SecureLiving Growth+ with Income Choice rider, using only $250,000 of premium, you can create $21,938 of income based on the past performance of the S & P 500, when starting income in year 13. This income is a joint payout that will be paid as long as either the husband or wife are still alive. This represents a 6.59% payout on a 64 year old male and a 66 year old female.

The article points out that each client’s situation can be unique, however we know that many clients may prefer to have the benefits that Fixed Indexed Annuities(FIA) offer, including:

1) protection from market declines and interest rate spikes for 100% of money allocated to the FIA

2) potential to create more income (on a guaranteed basis) than a do it yourself strategy, and

3) a personal pension plan where you don't have to stay up at night wondering where the income will come from once you retire.

Check out the article at: http://www.bloomberg.com/news/articles/2015-03-26/retirement-low-yields-long-lives-alter-advisers-risk-guidance?cmpid=yhoo