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® Registered trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company. Rick Forchuk, MBA, CFP, CLU, CH.F.C.

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Presentation on theme: "® Registered trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company. Rick Forchuk, MBA, CFP, CLU, CH.F.C."— Presentation transcript:

1 ® Registered trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company. Rick Forchuk, MBA, CFP, CLU, CH.F.C. Special Advisor, Distribution Practices Empire Life RETIREMENT: NOT SO FAST: THE GOOD, THE BAD … AND THE UGLY

2 2 2 2 BMD (Bank of Mom & Dad) Boomer parents are different: their parents grew up with a depression mentality and couldn’t help their adult kids financially because they did not have the resources Children of Boomers grew up with a sense of entitlement … encouraged through education and upbringing to “follow their dreams” Many Boomer parents equate giving to love … “If I give you this (house, money, free babysitting) it will show you that I care.”

3 3 3 3 The Good: Boomer parents feel a strong obligation to assist adult children who fall on hard times financially. The Bad: Their children feel a strong sense of entitlement to this help, and don’t see it as something that should be paid back, but rather is a right. The Ugly: Many Boomer parents are financially ruined by this practice at a time of life when there is no chance to recoup losses. * American Psychological Association based on a German study at the University of Erlang-Neremburg Why? Reasons Boomer parents helps range from feeling obligated and guilty, to “buying love,” to fear that they will be denied access to grandchildren if they don’t help.

4 4 4 4 Shark Tank, ABC Television, February 2013 – Jessica Haynes She asked for $70,000 for 30% of her company She already used the college fund from her Grandfather - $62,000 And she used the proceeds of her parents 2 nd mortgaging their home

5 5 5 5 Case Study #1: Marvin and Sarah Marvin: age 69 Sarah: age 67 Employment status: Marvin: auto mechanic, disabled (stroke) Sarah: working F/T - nurse The Stats: The Situation Sarah is supporting 9 people – son, daughter-in-law and two children moved in during the last recession … and never moved out. Her daughter, son-in-law, and three children have moved in as her son- in-law has lost his job … her daughter is a SAHM (stay-at-home- mom). The grandchildren are all in private school, the son and daughter and spouses take two vacations a year … Sarah and Marvin can’t afford to go anywhere, their retirement savings are gone, and their house is in jeopardy … but they are afraid if they act … they won’t be able to see the grandkids.

6 6 6 6 Case Study #2: Harold and Lynne The Stats: Harold: age 71 Lynne: age 70 Status: Fully retired since Harold’s age 65, mortgage paid off seven years ago, total retirement income from all sources: $71,000 per annum The Situation Son Jimmy & daughter-in-law Julie divorced 4 years ago to “pursue their passions” They have been raising their granddaughter Sally and recently adopted because, should should Jimmy remarry, Sally may not “fit in” The added expense requires that they continually dip into their principal, they will be raising a child until they are in their 90s, and education, etc. may bankrupt them

7 7 7 7 Case Study #3 : Suzanne The Stats: Age: 57 Marital Status: Divorced since age 22 Annual Income: $300,000 Ret. Savings $125,000 Adult Children: 3 - two sons, one daughter The Situation Bought house & pays mortgage for her single-mom daughter after daughter declared bankruptcy threatening homelessness for grandchildren Gave house down-payment to #1 son - $50,000 Son #2 is unemployed and separated has moved in with Suzanne, bringing his two children – he has taken two vacations this year, leaving the kids with Suzanne …

8 8 8 8 The Family Home … by the Numbers* 50%: The number unwilling to downsize, sell, or rent their principal residence 25%: The number expected to have debt on principal residence after 65 $71,000: The median debt expected for those who maintain residential debt 50%: The number who expected to pay this debt from their retirement income 25%: The number who don’t know how they will pay it off 50%: The number who believe their retirement savings will be gone in 10 years 50%: The number who said, “staying in my home is critical to my quality of life” *2012 Brondsbury Group survey of 1,500 Canadian homeowners age 50+ for the Investor Education Fund 32%: The number who said that winning the lotto was a key to their retirement plans.

9 9 9 9 Sales Idea: When working through a retirement plan, to help your advice be seen as very valuable”: First, determine the current level of retirement income projecting existing and anticipated resources (most will have a reduction in income): Second, establish what they have now … and what they will be able to afford at retirement Third begin taking away things they currently have to determine what goes and what stays

10 10 Example: George and Sally, age 65 & 61 current income, all sources: $136,000 projected 65, all sources: $81,000 reduction in existing debt: negligible Income shortfall: $45,000 The question: What will you have to give up to live on $81,000? cable TV? vacations? one vehicle? dining out? allowance for home repairs, vehicle repairs, replacement of key household items? Paint a picture of what life will be like without these things cell phones? the family home?

11 11 The Picture tells the story … Make certain you stick to the story … make it real, paint a picture of what life will be like without these things … and recognize that it isn’t for a day or a week … it’s forever! Life – Lines: Exactly the same technique applies when working on a life insurance sale – look at today’s lifestyle complete with all nice things … plus soccer, camp, ballet for the kids … and then begin taking it away piece by piece until the budget can be met.

12 12 Example: Taking it all away Summer with the Belson family $80,00 a year: the amount required to stay even $350,000: Existing personal life insurance $150,000: Existing group life insurance $45,000: Existing savings/assets 4% would generate $80k/ann. $500,000: commuted value of CPP surv. ben. $1,045,000: total assets $40,000/yr. shortfall. What Do The Survivors Give Up? Premium cable TV package: $1,200/yr. saving Summer vacation at rented cottage: $4,000/yr. saving Soccer, ballet, piano lessons: $4,000/yr. saving Winter vacation: $4,000/yr. saving Educational savings plans: $4,000/yr. saving Total: $17,200 Still need: $22,800


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