I will be starting twice weekly broadcasts of Speaking of Settlements begining this week and as part of this increase in programming I am working on several series, the first of which is how to handle the task of doing settlement, income or retirement planning in this brutally low interest rate market.
As I mentioned on a broadcast earlier this week, LIMRA came out with a study showing that sales of fixed annuity product in the US were down over 50% from 2009, which was already on record as a horrible year for structured settlements. What this indicates and any honest settlement planner or broker will tell you, is that the structured settlement and annuity professions are mired in a miserable sales slump.
There are two primary reasons, on top of several secondary ones, that are at the root cause of this slump.
The first is that the lowest historical rates on fixed interest savings and bond products in the 20th century are making people refuse to commit long to fixed annuity and savings products with returns that are often 2% or less.
The second is people are coming to realize that taxes will be going up in 2011, dramatically for some, and they are electing to take as much income or gains now as they can to pay down debt, rebuild cash positions and strengthen their personal and corporate balance sheets, all while keeping funds available to reinvest or deploy when the economic climate improves. If you are going to take income, this is the year to do it and the smart money is already starting the process.
However, all those facts aside, as planners and advisors we are still the one's that our clients, injury victims, savers and others planning for retirement turn to for guidance, and we have to come to grips with some of the clear economic signals and begin to assist our clients in how to plan accordingly.
This video lays out some of the elements of this 6 part outline on how to help people plan in this unique market and time in our country's history. I'll be looking at the issues of improved mortality and lengthened life expectancy, the looming reality of a double dip recession in 2011, the certainty of much higher marginal income tax rates and capital gains rates in 2011 and the fact that we won't see a big spike in yields until the economy improves and the private sector begins to have access to capital and produces real gains in payrolls and personal incomes.
It's not a simple world and it takes some thought, but unless you have a grasp on where the economy is headed and the fact that most people are currently hoarding cash and then are typically spending it down due to the inability of investment to produce sufficient income, you can't start to make a plausible case for why immediate annuities, life income annuities and structured settlements make sense.
Be sure to watch all 5 segments that follow this introduction and I promise you will come out of it with some solid ideas and concepts that you can use in your next meeting with clients or when examining your savings and income needs.