It’s Open Season for Roth Conversions – Make Sure You’re Hunting for Them

Bruce Beaty – VP Business Consultant


It seems that everyone is talking about taxes and creating tax-free future income for clients.

Maybe it’s because its tax time, but there seems to be more conversation than ever around national debt (over $28 trillion), stimulus spending and that impact on future taxation, and our current administration has bluntly stated that it will purse higher corporate and personal tax rates.

Now more than ever you have an opportunity to engage with your clients in tax planning and Roth conversion conversations. The time is now.

I noticed this week that one of our carrier partners was highlighting a product that allows for a 10% penalty free withdrawal based on the original deposited amount (rather than the current account value). This is unique in the annuity space and, positioned as a way to build an income bridge to maximize social security. Check out this idea from F&G on the Flex Accumulator. It got me thinking that this could be the ultimate “Deployment vehicle” for Roth conversions. To clarify, this product receives the rollover, say $500,000. Then the liquidity is used to send $50,000 in conversions each year going forward to the “receiving vehicle” 

Note: this is not the only product that could be used in this manner, give us a call and we can give you insight into other options.

Now what to choose for the receiving vehicle? There are several different angles to consider here when it comes to premium bonuses companies like Silac (up to 10%), Equitrust (up to 10%), AmericanLife (up to 16 + (3%)) and others offer large premium bonuses. These bonuses offset the tax impact on conversions at least up to a point.

Perhaps a flexible premium product to keep it simple (one policy, one application): Delaware or Nacolah are popular flex premium solutions. All future growth would be tax free and the client has the flexibility for whatever they want and need when it comes to distributions. With Surrender periods as short as 7 years, and trail commissions available the possibilities are vast.

Consider a large income bonus: Nassau RE (up to 45%, or 14% simple), Global Atlantic Income 150 (50% income-based bonus by year five), Allianz ABC (25%), Athene Agility (15%). Hey, if guaranteed income life is appealing, why not try tax free income for life?

If its “ leave on money” consider and enhanced death benefit product like Global Atlantic 7% simple for 15 years , Allianz ABC or AIG x5 benefit base 250%, or Athene Agility, or Americo’s Heritage Maximizer (30%).

Or, if you really want to get creative take the $50k and put it into a Single premium life product like Equitrust, NWL, Sagicor. Depending on the age and carrier that $50k could buy upwards to $100k in death benefit.

In summary, there a so many different solutions, and I am only highlighting a few here, but the opportunity has never seen such a great sense of urgency as it is seeing today. The power of the Roth conversions include a qualifying distributions (see official rules for details @ irs.gov) being tax free, this includes income doublers, income rider distributions, free withdrawals, and death benefits (including enhanced death benefits.)

Attached you will find the sales idea mentioned up front for Social Security Maximization, but honestly this might be an even bigger opportunity. Check out Kurt’s updated product picks by clicking the button below, or even better call Kurt or Katie today for a run down on any of these or other product recommendations based on your clients’ needs and objectives.

Retirees with a Guaranteed Income are Happier and Live Longer

Dee Costa, Sr. VP Business Consultant


Retirement happiness seems to be big news these days.  Economists have been doing work in the emerging field of “happiness research” and have started to publish their findings.  According to Time Magazine, The Wall Street Journal, and LIMRA, retirees who have a guaranteed paycheck coming in every month for the rest of their lives are much happier.  These studies show they actually live longer too!  

This makes sense because the number one worry of retirees is running out of money.  Retirees who have a set income for life remove a great deal of stress from their lives.  Prior generations used to get that guaranteed income from Social Security and a traditional pension to cover their basic living expenses.  But few employers now provide pensions, putting the onus of saving on the employee.  Social Security payments equal only about 40% of the average wage earners pre-retirement income.

How do we provide our clients and ourselves the additional guaranteed income?  How do we fill that income gap to create a steady paycheck for meeting basic needs? Income annuities provide an often-overlooked solution.  Most annuities offer an option for guaranteed lifetime income

As mentioned above, research shows that annuities provide both psychic and financial benefits.  According to the LIMRA Secure Retirement Institute Study, retired annuity owners feel more confident they’ll be able to afford their preferred retirement lifestyles than retirees who do not own an annuity – even if they live to age 90 or older.

The study released Feb. 20th found that 73% of retirees who own an annuity believe they will be able to live the retirement lifestyle they want, compared with just 64% of retirees who don’t.  Nearly 7 in 10 retirees who own an annuity are more confident their savings and investments will not run out if they live to age 90, compared with 57% of retirees who don’t own an annuity.  An annuity offers a solution for creating long-term income security along with the happiness that goes along with that.

The world has changed in the last year and no-one can really predict what’s ahead, but retirees are less interested in having all their retirement assets at risk.

Carl Richards, CFP and Sketch Guy commented “Risk is an arbitrary concept until you experience it.  Talking about being punched in the face is different from actually being punched in the face.”

Markets shed 40% back in March as efforts to slow the spread of coronavirus drove the economy to a near halt.  Though they bounced back remarkably fast, the economic outlook is uncertain, unemployment is high, and volatility is expected to remain until COVID -19 vaccines are widely distributed and are finally bringing the pandemic under control. 

We’re in uncharted waters, and our life rafts may not work the way they used to.  After years and years of printing money, bond yields remain paltry.  De-risking into higher allocation of bonds for the “fixed or guaranteed” income appears to no longer be as effective as it once was.  Most economists are not bullish on the outlook for bonds over the near future. 

Everyone we meet has a threshold for risk, but the vast majority of those retiring today are looking for ways to create that personal pension, that flow of guaranteed paychecks in retirement.  A well-diversified portfolio allows our clients, through the use of annuities, to create that guaranteed income stream to fill the gap for living essentials, and still remain in the market for longer term growth. 

Most retirees want a steady paycheck to cover their monthly necessities, they want to know that if the market bounces around that their retirement paycheck continues regardless.  If they are telling economists and researchers that this makes them happier, and we know from the studies it actually leads to a longer life, we are in a perfect position to help our clients eliminate fear and embrace a happy retirement.  As Tom Hegna says, “Don’t Worry, Retire Happy”.