Since I have grey hair, my clients tend to also have grey hair. And among our concerns is how bills will get paid as time marches on. Social Security and Medicare are lifesavers for many people as financial and health threats continue to surface. But there is much more at stake than social programs sponsored by the government.

The essense of these comments come from Gene Pastula, whose practice is centered in Southern California. He also has grey hair, and he spends his time running a financial practice. Once a week, he sends out his thoughts to fellow professionals, and I’m proud to be included among his colleagues.

The financial industry press is awash in articles about how to create retirement income from clients’ portfolios. What is the best way? …. Bonds, dividend paying stocks, some of both, bond ladders, floating rate and private debt instruments?

Most of these discussions completely ignore annuities as options. I sometimes wonder it that is because they don’t understand annuities, don’t get paid asset fees from annuities, or they truly think that annuities are not a good strategy for retirement income regardless of what history, The Wharton School, and common sense tells them.

Think about this…the most efficient way to get the maximum amount of retirement income from one’s portfolio, regardless of the return you actually receive, is to create an income stream that will spend your last dollar on the day you die.

No reputable advisor can provide assurance of accomplishing that for the client, but the insurance companies can. A Guaranteed Refund Annuity, a type of Single Premium Immediate Annuity (SPIA), will pay the retiree an income for life while promising to pay all of their money out, even if the annuitant dies before expected. Even if the annuity company is wrong in estimating their life expectancy (which they certainly can be), they will continue paying income for as long as the annuitant lives, even if it is well after the original premium deposit has been exhausted.

The result is typically a monthly income (annualized) rate for life of 6% to 10% of the premium deposit. When you include this as a part of the portfolio you will provide a guaranteed income rate of return 40% to 100% higher than you can currently offer using previously mentioned investments, while providing a guarantee that the income will last as long as the client. And the fact that this income is largely tax free for the bulk of the rest of their life further increases the relative value.

Now consider the possibility of laddering SPIAs as the client ages and inflation continues, requiring they have additional income. Older clients enjoy higher monthly rates. Or for added security, purchase a longevity annuity that employs a super discounted investment today to provide additional income at some predetermined point in the future. Call us and we can explain all of this to you. ( if you ask a question I can’t answer, then I call Josh in Gene Pastula’s office! ). I’m hoping you will be impressed.

As we have been saying for years, insurance planning is not an alternative to portfolio management. But it does play an important role in providing a safe, secure and predictable stress free retirement income.