Benefits Products & Services

Retirement preparedness

Can we right the ship?

By Thomas A. McCoy, CLU

It’s a rare occurrence, but sometimes an insurer can help shape public dialog about issues related to its products without actually pushing those products or calling attention to itself. The public is better off for it, and so is the company, regardless of whether any sales are directly attributable to the effort.

Jackson National Life, one of the largest writers of annuities, is creating a useful public discussion of issues relating to retirement planning and consumer spending and saving behavior. Greg Salsbury, Ph.D., executive vice president of Jackson National Life Distributors, author and a frequent speaker at financial planner gatherings, spearheads this effort. He has a doctorate in organizational communication and has taught at the University of Southern California.

Salsbury’s newest book titled Retirementology, Rethinking the American Dream in a New Economy, was published in May by Financial Times Press. Since then, the book, available through large retail distributors and online, has been among the top 10 best sellers in various business categories, according to Inc. magazine.

Retirementology is aimed at a consumer audience. It is full of advice for navigating through life’s potential financial minefields of mortgages, taxes, health care, and money choices involving our families and our retirement. The name Jackson National or any advocacy for its types of products is not included in any of its 200+ pages.

“The return we hope to get,” says Salsbury, “is to help our best advisors look like heroes in front of their clients. Will that always result in an immediate sale of Jackson products, or even insurance products? Of course not. In some cases the result will be just helping their clients budget more effectively, but in the process, the advisor’s credibility is built with their clients.

“There’s no question that a lot of the material covered in Retirementology spans far beyond the area of financial products and retirement planning. But that’s one of the major points of the book. For too long people have divorced those. They’ve seen the rest of their budgeting and saving and spending as separate from retirement planning.”

Salsbury’s perspective is the individual, not the group, market, since Jackson National’s products are sold primarily outside of employee benefits plans. But his message advocating a holistic approach to retirement planning would seem to have a place in the benefits market also. Asked what he feels is missing from employee benefits plans, he responds: “Advice—solid advice.”

The employee benefits business has yet to deliver the kind of financial advice discussed in Salsbury’s book—help with everyday budgeting decisions. The book can help employee benefit providers understand the reasons why so many of those covered by today’s retirement plans are facing an uncertain financial future.

Outside of his book Salsbury tells a financial advice story that shows how seriously he takes the emotional, psychological side of investing. A person in his early 30s came to him for career and financial advice, someone with one small child and one on the way. He had amassed a sum of $1 million.

“He asked me for investment advice—and he was considering a wide range of investments including buying apartments,” Salsbury recalls.

“My advice to him was that most of his wealth over the next 20 years was going to come from his earning power, if he continued correctly. I said, ‘You should probably take a very large part of that money and put it into an immediate annuity. I know that’s an option normally considered only by people significantly older than you, but I’ll tell you why.

‘Not only will it get it out of your hands, because I think, even though you won’t want to admit it, the odds of your doing something dumb with a significant part of your portfolio are very high. But secondly, it will keep you humble. Because you have that $1 million sitting in your account as a young man, you sit around thinking of yourself as a millionaire. That’s very dangerous. Get it out of your hands, dramatically reduce the money you have sitting there. You’ll forget about it—the same way people forget about the money Uncle Sam takes out of their paycheck every two weeks.’”

This kind of radically conservative advice leads to the issue of the strengths, possibly underutilized, that annuities can bring to retirement plans. Again, outside of his book, Salsbury comments: “If you look at the Monte Carlo models on asset allocation and diversification and how portfolios are impacted in up and down markets, it’s pretty dramatic how the introduction of, say, an immediate annuity into a part of the portfolio can reduce the chances of ruin. And so for that reason alone more and more people are turning toward the annuity solution to add that element to the portfolio.”

He adds, “The government itself is looking at how to incorporate annuity options into more 401(k) plans and how to make that happen.”

Perhaps it’s telling that in Salsbury’s glossary of 34 whimsical financial terms included in Retirementology (see box above), all of them have negative implications except for one: Shadow millionaire—Person fortunate enough to still receive a guaranteed pension for life.

With defined contribution plans replacing so many defined benefit plans, the same people who make mistakes in their everyday spending habits are in charge of their long-term money. For that reason alone, the message of Retirementology is an important one for everyday consumers and those who handle their employee benefits plans to consider.