Much has been written about Baby Boomers’ legitimate fears of retirement woes, spiraling health care costs and insufficient savings. It turns out that millennials, an even larger demographic, are equally concerned about their financial futures. The two financial concerns they find most worrisome are insufficient retirement savings and crushing student debt. Few financial professionals offer advice on these topics, yet it can be an entrée to a disability insurance sale.
#1: Help Them Practically Save for Retirement
When millennials consider the task of saving $1 million for a comfortable retirement, it may seem like the hopelessness of Sisyphus, condemned to an eternity of rolling a boulder up a mountain only to have it roll back down. According to Wells Fargo study, the goal is more than a pipe dream for those who start saving early and stick with a disciplined savings plan. Offer young clients these guidelines to use long-term savings to their advantage.
- Begin saving as early as possible; by mid-twenties adopt a disciplined savings habit.
- Save 5 percent of your salary, initially.
- Increase savings by two percent annually until reaching 13 percent.
Assuming a salary of $32,000 at age 25, 2 percent annual salary increases, and a 7 percent return on investments, by age 65, a millennial’s assets should be right around $1 million. Put into these terms, it’s a much more achievable goal. As more employers eliminate employer contributions to retirement plans, a consistent savings plan is essential to a secure retirement.
#2 Help Them Reduce Student Debt
Millennials are the most educated generation. More than 36 percent have completed four or more years of post-secondary education. Enrollment in graduate degree programs increased 41 percent between 1998 and 2012. With the higher levels of education comes tremendous levels of student debt. The full cost of the loan, the interest component, and the repayment terms are important to understand when initially taking out a loan. Credible.com, a student debt repayment service, finds that the important components of the loan are often overlooked. Those carrying student debt may be unaware that once employed, with a regular income, there are options to reduce monthly payments, the interest rate, and ultimately the total amount of the loan. Private lenders frequently refinance student loans at comparable interest rates and for shorter periods. Educate your millennial clients about options to better manage student debt.
#3 Help Them Protect Their Earning Power
Successfully building sufficient retirement savings and paying down student debt both rely on a steady income. When income is interrupted due to illness or injury, financial objections are threatened. A combination of individual DI and retirement plan disability insurance can prevent what might otherwise derail even the most disciplined saver.
Individual disability insurance is most affordable in your 20s and 30s. Premium is lowest at younger ages and applicants are generally healthier. While a typical DI premium hovers around 3 percent of income, for applicants in their mid-twenties to mid-thirties, premium may be only 1 to 2 percent of income. A non-cancelable and guaranteed renewable policy is often best at this age. The premium cannot be increased and the policy cannot be cancelled. Because the premium is so low at young ages, the extra premium to guarantee the right to increase coverage at a later date is usually very affordable and allows for salary increases over time. As income increases, the premium becomes an even smaller percentage. The client can feel secure that in the face of an income interrupting disability, funds will be available to meet financial obligations like repayment of student loans.
Adding retirement plan disability insurance can also be inexpensive. This disability insurance product is designed specifically to continue contributions to many qualified retirement plans. Funds are accumulated in a trust during the disability period. At retirement age, the funds are released to the insured.
Offer your guidance and expertise to give young clients a solid footing for a secure financial future. In this market of declining employer benefit offerings, your clients need disability income more than ever. Share our handout, Four Compelling Reasons for Paycheck Protection with clients to explain the many ways disability insurance contributes to a secure financial future and request a disability insurance quote online here.
