When FDR linked social security with retirement in the U.S. he adopted the retirement age used by Germany, 65 years old. The average length of life in the U.S. at that time was 63 (When Germany adopted the 65 year old retirement age, their average life span was 46). Today our average life span is more than a decade longer than it was in FDR’s time and is still going up.
The question before us is, “How will our business lives change due to the extension of productive lives of our insurance agency owners, most of whom are baby boomers?”
First, we must cover the crass truth. For those of us who come from genetic stock that tend to die in their sixties and seventies, the question of retirement is actually easier. If we have done well in our business and wish to spend quality time with family and doing other things, retirement is still a viable option. Inter-generational transfer of agencies, mergers and sales is still an option that will be exercised by many agents.
However, we encounter a larger and larger number of agents each year who very reluctantly enter the retirement pool. They may have promised children, employees, and others that they would turn their companies over to new owners. Agency Consulting Group, Inc. is called in to value the agency and structure the change of management along with ownership.
But a growing number of agents express reluctance and resistance when the transition is about to occur. They have planned for retirement but when retirement faces them, they don’t really want to leave.
It’s Really Not the Money!
If you are an agent of retirement age and find that you don’t have the assets to support yourself in retirement – even with the value of the agency earning you interest in an investment — then you may not be financially able to retire. This is a simple analysis of assets vs. long term living expenses and we all should do this exercise. Call us (800-779-2430) if such an analysis is needed in your Perpetuation Plan.
Most agents are aware that Agency Consulting Group, Inc. is a primary valuer of insurance agencies in the U.S. What you may not realize is that we actually counsel agents away from agency sales and transitions when their financial conditions prohibit their retirement.
Most independent agents in the U.S. fall into two categories, those whose agencies provide them basic support for their families (it’s a job and a working income) and those whose agencies provide sufficient income to both support their lifestyle and sponsor investments for retirement plans. You don’t have to be a liberal spender to fall into the basic support category. A large number of insurance agents earn substantially less than a six figure income during their productive careers. Although their annual compensation may provide them sufficient income to support a family, few agents in this category can invest sufficient income in retirement vehicles to continue their lifestyles past their productive agency careers. If their agencies, themselves, cannot provide sufficient value to provide equivalent income streams after their retirement, they may find that retirement is simply not accessible to them.
These agents can still perpetuate, sell or merge their businesses, but they have to continue to work simply to maintain their lifestyle.
On the other hand, many agents have done an excellent job in their money management and, as a result, are certain that they can support themselves as long as their agency’s value provides sufficient additional investment returns in the future. But what happens if you CAN retire, but don’t want to??
If you are fifty or fifty-five, sixty or sixty-five or even 70 and still have the energy and stamina to pursue the insurance business, you should have the option to sell and leave the business, but you should not be forced to leave it.
If we look at the number and quality of the people entering the insurance business in the last twenty years (our agency successors) we find that we haven’t enrolled the same quality or quantity of insurance professionals into the insurance industry than we did in the 1960’s through the 1980’s (the Baby Boomers). That is not an accusation. That is a reality because those subsequent generations simply had fewer members and those people had many more options in career development than we did when we went to college.