InsuranceNewsNet Magazine February 2012 : 33
CASE STUDY: plAnning ThroUgh griEf | lifE concept—less can be more—has been reinforced continually throughout my involvement with MDRT in meeting after meeting. My goal was to keep Ann financially comfortable without putting her through another difficult process. First, I asked Ann how much money she needed in order to live the lifestyle she envisioned after retirement. Then I showed her how much money was avail-able to her by using what I call a “Cash Flow Planning Chart.” We divided all the assets available into basic boxes to illus-trate their income-generating potential and then showed her some suggestions as to where we could move the money and how it would generate income—all on one simple chart. We had several different investments to navigate. Bob and Ann had a sav-ings account, a joint bank account at an investment firm and a managed money account. They both had IRAs and Ann also had a 401(k). Plus, there were life insurance proceeds. All these tools worked smoothly when planning a sta-ble cash flow for Ann. The biggest complication we encoun-tered involved Bob’s nonqualified annu-ity. Bob began taking systematic invest-ments out of it and there was no option to change that arrangement. We were required to leave the nonqualified annuity in place, which was restricting to our goal. To overcome this challenge, we used a nonqualified variable annu-ity with a unique rider that treats the income as an annuitization. For Ann, this translated to $500 per month from this annuity, with as much as $400 of the payment untaxed. By using this product, we were able to create a powerful com-bination of a guaranteed income for life and the ability to keep much of it tax-free. Bob’s nonqualified annuity supplied Ann with $4,000 per year. We also reconfigured Bob’s IRA into a spousal IRA rather than a beneficiary IRA because Ann, being much younger than Bob, would have been forced to take required minimum distributions based on Bob’s age rather than her own. By changing it to a spousal IRA, we gave her the power to make her own decisions about the funds, which was an integral part of my job as her advisor during this difficult time. Consolidating these IRA accounts generated an income of approx-imately $15,000 each year. We put some of the life insurance money and the proceeds from the sale of their Maryland house into savings and then put the rest into a managed money account. These arrangements gener-ated about $31,000 per year. Plus, Ann’s 401(k) was worth $4,000 per year and Social Security was providing a monthly income of $1,500. Through our plan-ning, we created a total income poten-tial of $78,000 per year from $882,000 of assets. Ann’s South Carolina home was mortgage-free. Ann decided she did not need all the money we could generate for her, so we decided to create a level of income that suited her lifestyle. After determining how much money she would need per month, we saved the rest so she could have money for the future and accu-mulate more wealth. Ann receives a net income of $4,100 per month, allowing her to stay retired and to fill her time with activities she enjoys. Since most of it is guaranteed income, she does not need to worry about having to find a part-time job, needing to remarry for benefits or do anything else she does not want to do in order to secure her financial sta-bility. She has a large cash reserve capa-ble of covering at least two years worth of her expenses in case she encounters any large, unforeseen financial hurdles. This reserve also allows her to ride out any stock market fluctuations, which is especially comforting in times of great market uncertainty. The benefits of such thorough plan-ning became evident to Ann soon after Bob’s death when she joined a widow’s support group. Ann expressed her relief to me, explaining how many of the wid-ows she met were not only enduring the stress of losing a husband, but also that of having a difficult time financially. Five years after her husband’s death, Ann says she is thriving both financially and emo-tionally. She has money to take care of all her needs, plus the means to enjoy her life. Aiding Ann through her loss helped underscore the importance of creating a painless, easy-to-understand planning process for my clients. Without the sim-ple charts, Ann might have been over-whelmed by the process, creating the potential for us to miss some greatly ben-eficial opportunities. Because of the long-term relationship I had built over the years, Ann and I worked well as a team, giving her the retirement she deserves, even in the face of a tragic loss. Steven A. Plewes , CLU, ChFC, is a 24-year member of the Million Dol-lar Round Table (MDRT) and has re-ceived seven Court of the Table and three Top of the Table qualifications. Plewes serves as MDRT’s divisional vice president of the best practices division. He is the principal of Advi-sors Financial Group in Gaithersburg, Md., where he specializes in income and distribution planning for corporate executives and widows. He can be reached at Steven.Plewes@innfeedback.com story Email your to: smorelli@innfeedback.com February 2012 InsuranceNewsNet Magazine 33
Publication List