Live longer. Retire with security.
The data is pretty clear – average life expectancy has risen by 16 years since the national retirement age was set at 65. According to a recent article in USA Today, the average American lives between 70 and 80 years; 73.5 for men and 79.3 for women. For example, the article says “If a male executive retires at 65 with $250,000 in savings and spends it down at $30,000 per year, that money might last him to age 73.5. But longevity tables indicate he could expect to live another decade, to 84. A large share of older Americans don’t know how long their own retirement is going to last; in other words, how long they are going to live. Longevity literacy matters when it comes to retirement planning. If your retirement budget assumes you will live to 75, and you in fact live to 85, you will probably run out of money.”
A Newcleus strategy called LINQS+ utilizes an annuity that will mitigate the retirement program expense on the bank’s books for an existing SERP and at the same time provide a lifetime retirement benefit.
According to Fabrizio D’Uva, Newcleus Regional Managing Director, “An executive might have a 15-year retirement payout. That’s the traditional way we have been designing SERPS for 20+ years. If I were to design a SERP with a lifetime benefit using LINQS+, it’d be significantly less expensive than the traditional SERP, and not expire after 15 years.”
“I can go to a bank and say, you have a SERP in place right now. I can reduce your costs by 20%-30% and not only that, but I can also change your 15-year benefit and make it a lifetime benefit for you and your family,” D’Uva said.
Typically, a CFO’s office is focused on how to offset the expense of Non-Qualified Deferred Compensation (NQDC), whereas Newcleus has come up with a way to reduce the cost while, at the same time, offer a lifetime fixed-income benefit. Almost sounds too good to be true.
“When I look at LINQS+ and what Newcleus has done, I’ve had CPAs tell me that I am the first person who has shown us a way to actually reduce the expense of a Non-Qualified Deferred Compensation plan,” said Dan Peterson, president and founder of E4 Insurance and Newcleus Regional Director.
LINQS+ – a strong enhancement to an existing plan
Larry and Leland Rowley, father and son team of Newcleus Regional Managing Directors, are introducing LINQS+ to existing customers. “Customers with existing retirement plans will implement LINQS+ as a strong enhancement,” they said.
Larry Rowley recalled a recent meeting with a CEO who wanted to plan for retirement and needed succession management.
“If one of his key people leaves, there goes his plan for succession. He needed a way to keep key people at his bank and also attract some new talent to the leadership team. The CEO was really excited about LINQS+. He sees this as a real part of the solution to his retirement problem by locking in his management team.”
Leland added that age isn’t an issue.
“We were at a conference speaking with a woman in her 30’s who was interviewing at another bank. I talked to her about LINQS+ and she said if the offer from the new bank included a lifetime retirement benefit she’d take the job. That would tip the scales. She needed something to put frosting on the cake.”
A retirement benefit with shareholder value
LINQS+ reduces the cost for the company – that’s shareholder value. It’s also a plus for banks when regulators see less expense and more assets on the books. That’s safety and soundness for a bank.
For banks that don’t currently offer retirement benefits, advisors are sharing the details of how SERPs, LINQS+ and BOLI can work together as a package.
In the world of NQDC planning, most Boards and corporate leadership teams are trying to find ways to offset the expense of compensation plans offered to reward and retain the best and brightest in their organizations. LINQS+ is an innovative way to do more for less.
“There is very little retention motivation in an annual cash bonus. A lifetime fixed-income stream has more muscle,” Peterson said.
Fabrizio D’Uva is a Regional Managing Director for Newcleus’ Bank Advisors with more than 20 years of industry expertise as a Non-Qualified Benefits and BOLI consultant and director specializing in the administration of NQDC and BOLI for community banks.
Dan Peterson is president and founder of E4 Insurance and a Regional Director with Newcleus where he provides compensation solutions to banks.
Larry Rowley, a Regional Managing Director for Newcleus, with decades of experience as an advisor of compensation and benefit planning, has over 35 years of working exclusively with financial institutions to attract, retain and reward key executives.
Leland Rowley, a Newcleus Regional Managing Director, has 20 years of experience as an entrepreneur, CEO and small business owner, delivering superior customer service and program administration.
Newcleus, based in Yardley, PA, is the premier benefit plan and financing strategy provider for the banking industry. For more information about LINQS+ contact Fabrizio, Dan, Larry or Leland, or any one of our Newcleus Compensation Advisors.