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How & When to Sign Up for Medicare



Medicare enrollment is automatic for some of us

If you are age 65 and eligible to receive Social Security benefits (or married to someone eligible to receive them), then you are also automatically eligible for Medicare Part A (free hospital insurance) and Medicare Part B (medical insurance for which you pay premiums), a.k.a. “original Medicare”.

If this is the case, then you’ll get a red-white-and-blue Medicare card in the mail 3 months before your 65th birthday.

Others may need to sign up

You can apply to receive Medicare benefits even if you haven’t retired. If you’re coming up on 65 and you don’t yet receive Social Security benefits, SSDI or benefits from the Railroad Retirement Board, visit your local Social Security Administration office or dial (800) 772-1213 or go to to determine your eligibility.

If you are eligible, you have the choice of accepting or rejecting Part B coverage. If you want Medicare Part A and Medicare Part B, then you should sign your Medicare card and keep it in your wallet. If you don’t want Part B, you put an “X” in the refusal box on the back of the Medicare card form, and send the form to the address shown right below where your signature goes. About four weeks later, you will get a new Medicare card indicating that you only have Part A coverage.

When you are enrolled in Medicare Part A & Part B (sometimes called “original Medicare”), you can join a Medicare Advantage plan (Part C). Anyone enrolled in Part A, B or C becomes eligible for prescription drug coverage (Part D).

If you are 65 or older and aren’t eligible for Medicare Part A, you can still sign up for Part B as long as you are a U.S. citizen or a legal resident of this country for five years or longer.

If you choose not to enroll in Part B during your initial enrollment period, you have another annual chance to sign up for it during a “general enrollment period” from January 1 through March 31, with Part B coverage commencing July 1.

If you already have medical insurance through a group health plan at your workplace or your spouse’s workplace, you can either enroll in Part B while you are still covered by that plan or enroll in Part B within eight months of leaving your job or losing your health coverage, whichever happens first.

When can you add or drop forms of Medicare coverage?

Medicare has enrollment periods that allow you to do this.

  • The initial enrollment period is seven months long. It starts three months before the month in which you turn 65 and ends three months after that month. You can enroll in any type of Medicare coverage within this seven-month window – Part A, Part B, Part C (Medicare Advantage Plan), and Part D (prescription drug coverage). If you don’t sign up for Part D coverage during the initial enrollment period, you may have to pay a penalty to add it later.
  • Once enrolled in Medicare, you can only make changes in coverage during certain periods of time. For example, the annual enrollment period for Part D is October 15-December 7, with Part D coverage starting January 1. (You can also drop Part D coverage, leave one Part C plan for another, or switch from a Part C plan to original Medicare or vice versa in this period.)
  • There is also an annual open enrollment period from January 1-February 14. During this one, you can switch out of a Part C plan and go back to original Medicare with Part A & B coverage starting on the first day of the month following that switch. If you do this, you have until February 14 to also join a Part D plan if you want to add drug coverage to complement Parts A and B. Part D coverage kicks in at the start of the month after the Part D plan receives your enrollment form.
Special situations

Individuals with end-stage kidney failure who need dialysis or a transplant may qualify for Medicare regardless of age. Upon diagnosis, they can contact the SSA. Medicare coverage usually takes effect three months after a patient begins dialysis. People with Lou Gehrig’s Disease (ALS) are automatically enrolled in Medicare as soon as they begin receiving SSDI payments. Americans who are under 65 and disabled also qualify for Medicare.

Do you have questions about your eligibility, or that of your parents?

Your first stop should be the Social Security Administration – (800) 772-1213 or You can also visit and

Mark S. Gardner may be reached at 214-762-2327


Medicare Open Enrollment for 2014



Medicare Open Enrollment has arrived.

The open enrollment period for 2014 runs from October 15-December 7, 2013. This is not only a period where you may enroll for the program, but also switch providers for your comprehensive health and drug coverage.

Some key dates to remember

This fall and winter, there are three periods in which Medicare beneficiaries can either enroll or disenroll in forms of coverage:

Now through December 7: Open enrollment period

This is when you can elect to leave Original Medicare (Parts A and B) for a Medicare Advantage Plan (Part C) and change your prescription drug coverage (Part D). You can also elect to get out of a Part C plan and go back to Parts A and B during this period.

December 8: Annual enrollment period begins for 5-star plans

As you probably know, Part C and Part D plans are assigned ratings. Beginning December 8, 2013 and ending November 30, 2014, a window opens for you to enroll in a 5-star Part C or Part D plan. You can do this once per 365 days. How do you find the 5-star plans? Visit

January 1-February 14: Disenrollment period

If you join a Part C plan in late 2013 and want to reverse that decision, you can disenroll from that Medicare Advantage plan in this window of time and go back to Original Medicare with a stand-alone Prescription Drug Plan (Part D).

Some key dates to remember

No. Medicare isn’t part of that. If you have Medicare, you are already insured in the eyes of the federal government. You don’t have to make any changes to your Medicare coverage because of the implementation of the exchanges, and your Medicare benefits won’t change as a result of them, whether you have Original Medicare or a Medicare Advantage plan through an HMO or PPO.

In case you are wondering, you can’t buy Part D prescription drug coverage or Medigap insurance through the new online health insurance exchanges.

What should you look for in a Part C or Part D plan?

Be sure to take a look at a few key factors.

  • While premiums matter, overall plan expenses ultimately matter most; scrutinize the copays, the co-insurance and the yearly deductibles as well. Attractively low premiums might not tell you the whole story about the value of a Medicare Advantage plan.
  • How inclusive is the plan network? Assuming the plan has one, does it include the hospitals you would choose and the physicians that now treat you?
  • Regarding Part D, how wide-ranging is the prescription drug coverage? Look at the list of approved drugs (the formulary). If the drugs you want or need aren’t listed, you are probably going to have to open your wallet to pay for them. The frustrating thing about formularies is how they change; drugs on this year’s list may not always be on next year’s list.
  • Every fall, Medicare plans mail out Annual Notice of Change (ANOC) letters to their plan members. Use this notice to determine if your current plan is still right for you and your medical care needs. If you didn’t receive such a letter in September, contact your plan.

How expensive will Part D coverage be next year?

According to CBS MoneyWatch, monthly premiums for a stand-alone Medicare Prescription Drug Plan (PDP) under Medicare Part D are projected at $31 for 2014.

The initial deductible for standard Part D prescription drug coverage will be $310 next year. After your total prescription drug costs surpass $310, you’ll pay 25% of your total drug costs between $310-2,970. You’ll find yourself in the “doughnut hole” between $2,970-4,550 (wherein you pay 100% of any drug costs under the standard plan). Should your total prescription drug costs exceed $4,550 in 2014, you’ll be eligible for catastrophic coverage, leaving you on the hook for just 5% of drug costs above that level.

Mark S. Gardner may be reached at 214-762-2327


Six Things Woman Need to Know About Legacy Planning for Women



Women often become guardians of family wealth.

Many women outlive their spouses, and have the opportunity to have the “final say” (from an estate planning standpoint) about the wealth they have built or inherited. Legacy planning is essential for single women and couples, too, as one or two successful careers may leave a woman or a couple with a significant estate.

So how do you take steps to convey the bulk of your wealth to the next generation, or to your favorite causes or charities after you are gone? It all starts with a conversation today – a conversation with a legacy planning professional.

Analyze the risks to your net worth & strategize to alleviate them.

You have years to go, perhaps many years, before you pass away. In those years or decades, you must manage portfolio risk, taxation, medical or long term care costs, and perhaps “predators and creditors” as well. What tax and risk management strategies can be put into place with an eye toward enhancing your net worth? Can you reduce the size of your taxable estate along the way?

How might trusts come into play?

If you want to shrink your taxable estate, a well-crafted trust may provide a way to do it. There are many, many different kinds of trusts. A basic revocable living trust helps a family avoid probate, but it doesn’t do anything to reduce estate taxes. Other trusts do offer grantors and beneficiaries opportunities for substantial estate and/or income tax savings.

For example, you can bequeath an amount of money up to the limit of the current estate tax exemption to a bypass trust; at your death, the remainder of your estate can therefore transfer to your spouse tax-free, or optionally your spouse can enjoy income from the trust while living with your heirs receiving the remaining principal tax-free at his or her death. Blended families sometimes choose to use a qualified terminable interest property trust (QTIP) plus a bypass trust to direct income derived from assets within an estate to a surviving spouse and then the bulk of the estate to their children and stepchildren. Grandparents sometimes use generation-skipping trusts (GSTs) to forward big chunks of money tax-free to grandchildren.

Women business owners have employed irrevocable life insurance trusts (ILITs) to shrewdly remove their life insurance from their taxable estates. In an ILIT, the trust becomes the owner of the life insurance policy. When the business owner passes away, the beneficiaries receive tax-free policy proceeds, which can be used to sustain the family business and pay estate costs.
A qualified personal residence trust (QPRT) will permit you to gift your primary residence or vacation home to your children while you retain control of it for the term of the trust (typically 10 years). If your home seems poised to rise in value, the QPRT may lead to major estate and gift tax savings – it helps you transfer the home out of your taxable estate, thereby reducing its size. The hitch is that to validate the QPRT, you have to outlive the term of trust. Assuming you do, you can either a) move out of your house at that point or b) keep living in it while paying your heirs fair market rent as a tenant.

How well can your legacy plan sustain your values?

Can you design it to teach your adult children and grandchildren lessons in character, responsibility, ethics and social service? Philanthropically, what do you want to accomplish? If you want to direct wealth to charities or other non-profits, you will need to pick one or more vehicles with the help of a legacy planner – options may include a family foundation, a charitable remainder trust (CRT), a tax-deductible charitable gift of appreciated securities with a resulting income stream, or donor-advised funds. A conversation with a tax professional can inform you of the kinds of assets you do and don’t want to gift from a taxation perspective.

As you craft your legacy plan, can you do it at reasonable cost?

There is truth in the old maxim “you get what you pay for”, but at the same time, you want to work with a legacy planner whose fees aren’t exorbitant. Even the fees for creating a simple living trust can vary widely. You definitely want the help of experienced professionals here; given that each legacy plan is on some level an agreement with the federal tax code, legacy planning is not a do-it-yourself project.

Your legacy plan can represent your final, thoughtful gift to your loved ones.

When you think of it that way, it becomes easier to conceive and implement with the input of your spouse, your children and your grandchildren. Along the way, valuable money lessons can be taught and responsibilities shouldered.

Mark S. Gardner may be reached at 214-762-2327



The Government Shutdown

As you have no doubt heard, the United States government shut down at midnight (Eastern) October 1, 2013. There are many questions and concerns about this situation, but here are some basics.

What happened?

In short, Congress did not pass any of their appropriations bills. These bills provide money to various to federal agencies. Federal law requires agencies without these funding laws in place to close.

<h2class=”sub_heading”>How long will this last?As with other shutdowns, this is largely up to the two major parties and their abilities to reach whatever deal is necessary to get the bills passed. If we look to history, the two most recent government shutdowns happened in the Clinton administration. One only lasted five days. The other lasted three weeks.

What’s closed, what’s opened?

Not every public service is shut down entirely, as not every agency requires appropriations to function. Social Security and Medicare are not affected, active duty military continue to function, as does the Department of Defense, as do intelligence, law enforcement, and our embassies overseas. Some are only partially closed; U.S. Courts will be open for 10 days, for instance.

CNN has a frequently updated list of shutdowns at:

How is this different from the debt crisis?

They are different situations, but one can affect the other. The debt crisis relates to the separate matter of establishing how much money the U.S. Government can borrow in order to fund its various agencies and programs. However, Treasury Secretary Jack Lew says that the crunch is coming soon – no later than October 17.

With the shutdown a fluid situation, it’s difficult to say when this will be resolved. Whether you are a government employee or an ordinary citizen, it’s only natural to be concerned. It may be a good time to contact a financial professional and inquire if and how the shutdown may affect you.

Mark S. Gardner may be reached at 214-762-2327



Ten Things that one should know about the Affordable Care Act and how it will affect you!!!


In March 2010, President Obama signed comprehensive health reform, The
Patient Protection and Affordable Care Act (ACA), into law. The law
makes preventive care, including family planning and related services
more assessable and affordable for many Americans. While some provisions
of the law have already taken a fact, many more provisions will be
implemented in the coming years.

Important Dates

  •       03/23/2010 —- PPACA Signed into Law
  •       01/01 2013 —- State and Regional Exchange Certification
  •       10/01/2013 —- Open Enrollment begins, will remain open until March 31, 2014
  •       01/01/2015 —- Exchanges financially sufficient
  •       01/01/2017 —- Tentative date for large groups

Big Picture- Affordable Care Act rolls out in phases that began in 2010 and continue through 2019


  • Standards for Minimum health benefit plan offerings
  • State based Health Benefits Exchanges
  • Mandates for Employers and Him individuals to provide/purchase coverage
  • Premium Credit or cost share subsidies to qualified individuals
  • Taxes and Fees
  • Requirements that insurance companies spend a certain percentage of premium dollars on patient care
  • Certain preventive care services covered without cost-sharing (out-of-pocket expenses)
  • Insurance market reforms
  • Expanded appeal rights for consumer

Changes to Medicare reimbursements


  • Grandfathered Plans, any plan in effect on or before March 23, 2010
  • not required to implement a number of health reform laws including:
  • Rating restrictions associated adjusted community ratings
  • Capping deductibles and/or implementing out-of-pocket limits
  • Providing essential health benefits (small group only)
  • Providing coverage for clinical trials

Public Exchanges

  • Each State must have an exchange (State or Federally run)
  • A place where individuals are employees who cannot afford employers plans’ can purchase insurance coverage
  • 3 Models
    • State Run facilitator – Carriers compete in an Open market. Any
      carrier meeting minimum
      requirements can participate
    • State Run Active Purchaser- state (s) solicits bids from carriers
      and determines which plans to offer;
      state (s) directly negotiates with carriers
    • Federally Run model- U.S. Department of Health and Human Services (HHS) runs the exchange for the state who do not create one

Exchange Plans

  • Bronze plans will have the lowest monthly premium, but costs shares will be more when health care services are needed
  • Platinum plans will have highest monthly premium but costs shares will be low

Essential Health Benefits Required:

  • Ambulatory patient services
  • Emergency Services
  • Hospitalization
  • Maternal and Newborn
  • Mental Health Services
  • Prescription drugs
  • Rehab services
  • Labs
  • Preventive and Chronic Disease Management
  • Pediatric Services, including oral and vision care

Tier Levels:

  • Platinum- 90% coverage
  • Gold- 80% coverage
  • Silver- 70% coverage
  • Bronze- 60% coverage

Individual Mandate-Buy a plan through either: Employer, Individual Market or traditional market or Go uninsured and pay penalty

  • 2014 – Greater of $95 or 1% of annual income
  • 2015 – Greater of $325 or 2% of annual income
  • 2016 – Greater of $695 or 2.5% of annual income
  • 2017 and beyond – Annual adjustments

Affordable Care Act doesn’t require employers to contribute to monthly premium or offer dependent coverage.

Companies can: Offer health insurance that meets the minimum coverage definition and affordable

Offer some level of coverage but does not meet minimum requirements and pay penalty

Stop offering coverage that employees purchase through exchange, and pay employer penalty

  • Note – ACA doesn’t require employers to contribute to monthly premium or offer dependent coverage
  • Mandate
    • Minimum coverage is not offered to full-time employees and one
      employee gets subsidize coverage equal $2000/employee after first 30 FTE
      (Full-time equivalent)
    • Minimum coverage is offered to full-time employee but it is not
      affordable an employee gets subsidized coverage +$3000/employee
      receiving subsidize coverage

The Affordable Care Act soon will be rolled out and like most Americans and Companies we all will have many questions. There’s no foolish question. As we all will be learning on the go. Feel free to call me, Mark S. Gardner at 214 – 762 – 2327. If I’m on another call don’t hesitate to leave your name and number and the reason you’re calling. Either I or one of my associates will contact you to see how we can help you. Stay tuned there is more to come with Obama Care.



Who is the Lone Ranger? And why do I want to REACH them.

Who is the Lone Ranger? And why do I want to REACH them.

Uncle Mark wants YOU. If you have children born between 1965 to 1981 or know of anyone fitting this description
show them this article—-You will be doing them a big favor !!!

Generation X may not be as big as the baby boomer generation, but it is 70 million strong. Generation X makes up the next face of retirement and continues to be overlooked. But, as a 2012 Insured Retirement Institute study suggests, this generation is in dire need of financial advice. From fears of longevity to paying for healthcare-related costs during retirement, this group is open to learning from trusted insurance professionals who can provide the expertise to guide them through the retirement planning process.

Who is Generation X?

Generation X  who are you and what are your retirement concerns?

Now Generation X is commonly referred to as Gen X. It is the generation born after the post-World War II baby boomers during the years 1965 to 1981.

Generation X Today

An Educated, Underinsured Group Today, as a group, Generation X is technologically savvy and generally gathers information from the Internet through onlinereviews and social media. They are educated compared to other generations, with one third having at least a Bachelor’s degree, and many working in professional occupations. A majority of married Gen Xers own homes, as the following indicates:

Gen X largely consists of families with children, breadwinners approaching prime earning years, and those tasked with caring for aged parents. The combination of these characteristics positions them as model candidates for life insurance and annuities. Gen Xers are largely married with dependents; their current levels of insurance coverage indicate, however, that their households will not be able to cover future living expenses if the primary wage earner dies.

Facing an Uphill Battle

Now that we have an understanding of who Gen X is, let’s take some more time to understand their specific fears related to retirement. Similar to baby boomers, Gen Xers have their own concerns surrounding the “what-ifs” of retirement. Generation X faces an uphill battle, getting hit the hardest by the Great Recession.6 And what’s even more eye-opening, Gen Xers are on track to be financially worse off than the generations before them.
Unlike many Baby Boomers, most Gen Xers are aware that they will not have the luxury of relying on generous company pensions. Generation X is also tuned in to recent news about the uncertain future of Social Security, as many Gen Xers are skeptical that they’ll even receive projected Social Security benefits. And to make matters worse, Generation X faces high levels of debt, which includes student loans, high housing costs and periods of unemployment. These combined factors are making a big impact on Gen X savings accounts.
According to Insured Institute’s 2012 study highlighting Generations X’s retirement confidence, as mentioned earlier, the group’s biggest retirement concern is having enough money to live comfortably during their retirement years, followed by fears of not having enough money to pay for medical expenses during retirement.
This undeserved market has several roadblocks ahead of them, and longevity is just one concern out of many. Gen X is in need of retirement planning advice to help meet their many objectives. Fortunately, there are some potentially effective solutions, including annuities with income riders, that you can offer Gen X prospects and clients to help them create their own “personal retirement pension plan.”

Providing An Attractive Solution: ATHENE Benefit 10SM with
Enhanced Benefit Rider: One Rider – Five Benefits*

Now I will help the individual or couple focus on how to successfully address Generation X’s main retirement fears with helpful guidance and effective strategies. ATHENE Benefit 10 with Enhanced Benefit Rider may be an effective solution to help Gen X  reach their retirement objectives and give them the confidence they need to prepare for their future. Although their retirement may be decades away, adding ATHENE Benefit 10 with Enhanced Benefit Rider to a retirement portfolio can help Gen X clients’ confront their “what-ifs” of retirement.

Before making any recommendations, it’s important to carefully understand and consider Gen X clients’ objectives. If Generation X answer yes to the following questions, it may be worthwhile for them to consider ATHENE Benefit 10 with Enhanced Benefit Rider to help diversify their overall retirement portfolio.
Generation X ask yourselves the following questions:
• Do you want retirement income guaranteed for your lifetime?
• Are you looking for a tax-advantaged way to grow your retirement dollars?
• Do you worry about outliving your retirement dollars?
• Are you concerned about having the flexibility to meet your ever-changing needs?
• Do you know how you’d pay your bills if you developed a chronic illness and couldn’t take care of yourself?
Since Generation X is faced with the possibility that they may receive reduced Social Security benefits, it’s important to focus on how Gen Xers are going to supplement their retirement income. This impressive annuity with its five-in-one benefit rider can provide guaranteed income for your client’s lifetime helping to create their own “personal pension plan.”

Furthermore, ATHENE Benefit 10’s accumulated value AND the Enhanced Benefit Rider’s Benefit Base grow tax-deferred, giving your Gen X client an instant advantage in effectively accumulating retirement dollars. The Enhanced Benefit Rider may be especially ideal for Gen X clients, as the Benefit Base can accumulate for up to 55 years or age 85, whichever is greater.
And lastly, ATHENE Benefit 10 with Enhanced Benefit Rider can provide flexibility, giving your Gen X clients the confidence of knowing they have a versatile product that can adapt to their changing needs. ATHENE Benefit 10 offers free partial withdrawals so your clients can access a portion of their annuity’s value if needed. The Enhanced Benefit Rider can provide living benefits, which allow clients to withdraw funds without penalty if they are unable to perform some activities of daily living (ADLs), are confined to a health care facility, or if they’re diagnosed with a terminal illness.

Call Mark Gardner 214-762-2327 to make an appointment to discuss how he can address your concerns.


Same-Sex Couple that holds a Marriage License

Same-Sex Couple that holds a Marriage License and one of the parties is a beneficiary please note that on June 26, 2013 the United States Supreme Court declared a portion of the Defense of Marriage Act (DOMA) to be unconstitutional, holding that same-sex marriages recognized under state law must also be recognized for purposes of federal law.  Exactly how this Supreme Court decision will affect spousal provisions applicable to policies and contracts issued by a Life Insurance Company is still being determined, especially in regard to residents of states which do not recognize same-sex marriage.

 Some members of industry organizations are looking closely at this new development and how it impacts insurance companies. We will keep you informed of new industry guidance as it becomes available. Note to ensure that you are acting in accordance with all state and federal laws and regulations please be sure to list relationship as SPOUSE regardless of the state in which you are living, when applying with a same-sex couple that holds a marriage license and one of the parties is a beneficiary. If this applies to you or you know someone who is presently in this status let them know about DOMA. This is only my opinion as I am not an attorney nor do I know what any insurance company may do or not do based on the information I provided.


Sales Tip of the Week

Let’s revisit why to consider a fixed indexed annuity over a CD? Because of stock market volatility money needed in the short term could create a loss if invested in equities. Consider fixed rates for short term dollars. Conversely, because of interest rate volatility, money needed in the long term invested in CD’s may suffer inferior returns. Think upside potential for long term dollars. Here’s an idea using a fixed index annuity to take advantage of volatility to create returns while protecting principal from market risk:

Sam, age 66, has $100,000 in a 5-year CD that will renew at 1.17%

  •  If nothing changes, the $100,000 will grow to $109,752 in 8 years.
  • Consider allocating $40,000 in a fixed account that will earn about the same return as 100% of the funds deposited in a CD
  •  Place the remaining $60,000 in the S & P Annual Reset Point to Point (best case 5.75% return) and potentially have $95,718 in 8 years.

Contact Mr. Mark Gardner today at 214-762-2327 or email him at to further discuss your personal issues and needs


Welcome to Retire Well Dallas

We at Retire Well Dallas have a simple goal: To make your retirement the best years of your life.

Time and finances can slip away almost invisibly. We have seen it happen all too often, too unnecessarily. We understand how important time and financial security are in our own lives, so we care about every client that walks through our doors. It’s why we at Retire Well Dallas dedicate so much time upfront (fix it to read) to understand your financial and lifestyle objectives before we offer any financial advice. We’re committed to delivering you a custom strategy based on your individual needs, not some tossed-off stereotype or 4% rule that sounds great in theory but can’t be realized in practice over the long term.

Some say time is free. We believe it’s priceless. You spent your whole life working to have more time to spend with your family, to travel and do the things you love to do. We’re committed to preserving the time of your retirement with a secure income so that you can live it with a sense of security, relief, and joy.

Let’s not waste another minute before discussing your personal financial goals and dreams. Allow us to show to you the difference Retire Well Dallas can make.

Please click on the link below that features Mark S. Gardner on Success Today. The episode featuring Gardner recently aired on ABC, NBC, CBS and Fox affiliates across the country.


Are Annuities the Solution to Old 4% Retirement Rule?

By William H. Byrnes, Esq., Robert Bloink, Esq., LL.M., AdvisorOne

For years, the so-called 4% rule provided the baseline from which advisors launched strategies for retirement account withdrawals. The rule is simple, well-trusted, and relatively unlikely to fail—or at least it used to be. In today’s low-interest rate environment, the strategies that worked for the past 20 years are simply not cutting it, meaning that advisors and clients must readjust their expectations to uncover alternative solutions for providing sustainable retirement income.

While the word “annuity” may be a dirty one for clients who have traditionally sought aggressive investment returns (or worried about their high costs), the evidence cannot be ignored: new studies suggest that annuities are a competitive alternative to the newly old-fashioned 4% rule. For those clients unwilling to modify their retirement income planning strategy so dramatically, many advisors have discovered a new method for determining retirement withdrawal rates, inspired by the system used by the IRS itself.

The Problem With 4%

As the name suggests, the 4% rule suggests that if your client withdraws 4% of the balance from a retirement account each year, he will be able to create a sustainable retirement income stream with virtually no risk of exhausting the account assets. This strategy has worked for years, more or less, but there have always been problems, such as the failure to account for actual investment performance in any given year. It has generally been a safe bet, however, that the client will not run out of money, which is the greatest fear for many retirees.

Today’s low interest rate environment has, unfortunately, eliminated the primary benefit of the 4% strategy—namely, the 4% rule is no longer a safe bet. A new study (by Texas Tech professor and Research magazine contributor Michael Finke) has produced evidence that, because interest rates are about 4% lower than their historical average, the anticipated failure rate for the 4% rule has jumped from 6% to a whopping 57%.

These numbers cannot be ignored. The study found that the failure rate would remain at 18% even if interest rates increase in five years’ time, though there is no evidence to suggest that we will return to 20th century interest rates anytime soon, if ever. The bottom line: it is time for clients to oust the 4% withdrawal strategy.

The Annuity Solution

Even if your clients are tired of hearing about the benefits of annuitizing their assets, it is becoming a simple fact that retirement accounts are not yielding the returns that they have in the past, and the potential of a 57% failure rate by following the 4% rule should get clients’ attention. When the 4% rule’s failure rate was a modest 6%, there may have been reason for clients to reject annuity products as noncompetitive, but today’s reality has changed the picture. Annuities should be seen as more attractive than ever.

An annuity product is not perfect, however. It ties up your clients’ funds in an investment that is difficult to liquidate, meaning that the client cannot easily access the funds to provide for unexpectedly high health-related or other costs during retirement. This will provide some clients with incentive to purchase long-term care insurance that will protect them against unforeseen costs that aren’t usually reimbursed by Medicare.

Other clients will continue to insist that long-term care insurance is prohibitively expensive. This may be true for many, but luckily annuity products have also changed with the times, and many insurance companies now offer annuity products with critical care riders to provide long-term care benefits in addition to the traditional annuity income stream. The products also address the “use it or lose it” problem posed by long-term care insurance because most contracts offer a cash surrender value if the long-term care feature is never tapped.

The Beneficial IRS RMD Method

Studies have also identified the IRS’s RMD method as a better alternative for determining retirement account withdrawal rates than the 4% rule. Not only is the RMD approach almost as simple as the 4% rule—rather than withdrawing 4% each year, the client consults IRS tables to determine the applicable annual percentage—it offers much more flexibility.

The RMD rule is, in many ways, much more realistic than the 4% rule because it bases withdrawals on the current value of the client’s retirement assets. While this requires determining what that value is each year, it also allows clients to modify their consumption levels based on actual account performance. Because the withdrawal percentages are based on life expectancy and vary with age, it is unlikely that the client will outlive his assets using this method because the account’s rate of return is factored into the equation.


Many of your clients may be reluctant to abandon what they think of as a tried-and-true method for determining withdrawal rates, but recent studies provide a powerful argument in favor of seeking alternatives. Simply put, if the interest rate environment has changed, causing old strategies to fail, why shouldn’t your clients’ perceptions change along with it?

Contact Mr. Mark Gardner today at 214-762-2327 or email him at to further discuss your personal issues and needs