Sometimes, the most resounding lessons on financial strategy can come from the most unlikely of places.
Case-in-point — a classic bedtime story I read to my daughter struck a perfect correlation to our business.
The story is Dr. Seuss’ classic Green Eggs and Ham.
For those of you who might have forgotten the glorious wonderment that is Dr. Seuss’ story, the tale goes like this:
When the underappreciated protagonist Sam-I-Am offers our main character the opportunity to try green eggs and ham — something new to expand his palate and improve his enjoyment of life, the offering is met with an unequivocal ‘NO!’
Sam-I-Am tries and tries to get the main character to try green eggs and ham — be it ‘in a car’ or ‘in a house’, ‘with a fox’ or ‘with a mouse’, ‘on a boat’ or ‘in a tree’ — he will not try them and asks Sam-I-Am to simply ‘let me be’.
After countless efforts and scenarios, the disagreeable character finally gives in and tries the green eggs and ham. Much to his surprise, he loves it. He realizes that he’s been missing out on something magical and wonderful for quite some time.
I draw a connection to the annuity — a product within our industry that many of you know, use, and love. However, the general public is reluctant to consider it, no matter how hard we try to convince them of its benefits.
Many of your clients may be like the main character in Green Eggs and Ham — not knowing why they don’t like them, but simply resist without ever even trying them.
‘That annuity plan! That annuity plan! I do not like that annuity plan. I do not like them insurance man, I do not like that annuity plan.’
‘I would not like them here or there. I would not like them anywhere.’
‘I will not try one in my house, I would end up in a poorhouse. I will not try one with a fox, I’ll end up living in a box. I will not try one on a boat, around a moat, or with a goat. Talking heads say they are no good, no good you see. Now you go on, just let me be!’
‘Try one! Try one! And you may. Try one and you may, I say.’
Many people are afraid of things of which they are unsure or unaware. They have misconceptions of what an annuity is — and oftentimes, their definition of an annuity is entirely out of date.
Keep in mind that the annuity may not be right for everyone — so we should avoid painting the picture that an annuity is the best answer for every client.
However, with more and more Americans preparing for retirement without pensions and many people having no idea how to replace their paychecks when they retire, the need for guaranteed lifetime income that annuities can offer may be greater than mainstream media would have you believe.
In fact, the math and science behind retirement planning (yes, it exists) tells us you cannot retire properly without one.
In his book Paychecks and Play Checks: Retirement Solutions for Life, Million Dollar Round Table member and financial professional Tom Hegna explains that, “the lifetime income annuity protects against many of the other risks that retirees face,” including inflation, longevity, market risk, and withdrawal rate risk.
When retirees and pre-retirees were asked in a recent study conducted by Allianz Life Insurance Company of North America to describe the top characteristics they would want in a retirement solution, they described annuities without even realizing it:
Top 5 most important characteristics in a retirement solution:
- Stable, predictable retirement standard of living
- Guaranteed income stream for life
- Guaranteed not to lose value
- Protect against market downside
- Don’t think about, stable, predictable
What’s more, those that own an annuity are typically extremely happy with their purchase. Annuities were ranked second highest in satisfaction among consumers, beating out mutual funds, stocks, U.S. Savings Bonds, and CDs.
Of those surveyed who own annuities, 76% are happy with their purchase because they consider annuities to be:
- A safe long-term investment vehicle (57%)
- A great way to supplement their retirement income (56%)
- An effective way to get tax-deferred growth potential (56%)
Annuities can also take longevity risk and sequence risk off the table for retirees — something no other product can solve for.
We teach financial professionals a strategy called Income Allocation — a way clients can create predictable, reliable lifetime income using a portion of their assets, while freeing up the other part of their portfolio to do other things.
In fact, Income Allocation can give clients a sense of “extra money” during retirement.
My point is that once today’s pre-retirees and retirees understand the benefits that annuities can provide them as part of an overall retirement strategy, they often times have the “a-ha” moment — similar to the moment of realization in Green Eggs and Ham.
If you are recommending a product to your clients, you may receive a reaction similar to Sam-I-Am — resistance and uncertainty because your client perceives that you aren’t showing him or her a solution to the problem.
But with the persistence of sharing a solution, such as the Income Allocation plan — where you outline how an annuity fits into an overall strategy and how the annuity can provide a lifetime income stream that cannot outlive — and the chances for successful retirement security increase exponentially.
‘Say, I like that annuity plan, thank you, thank you, insurance man!
With your plan I am content, I can enjoy retirement.
A stable, predictable standard of living, plus I can do some charitable giving.
Now I can enjoy that extra house, and live out my golden years with my spouse.
You have replaced my doubt and worry with lifetime income, you did so surely!’
