Annuity


Annuities have always, but now more than ever, play a major role in establishing an iron-clad retirement income plan.

What is an annuity?  


These are tax deferred/safe money planning vehicle that provides a multitude of benefits.  Many annuity options are available from our carrier partners.

They come in multiple flavors:

  1. SPIAs – Single Premium Immediate Annuities – These products essentially provide guaranteed income that can be based on a single individual or two individuals if there’s a spouse involved.
  2. Traditional Fixed Annuities – These products provide a guaranteed return for duration of the surrender period. This is your CD replacement solution
  3. Variable Annuities – These type of annuity is tied to the market so the policy will participate in both up markets as well as down markets. It’s the most aggressive type of annuity.
  4. Fixed Indexed Annuities – This is the fastest growing sector of the annuity marketplace. I would categorize this type of annuity as a hybrid annuity – It offers upside potential tied to a market index but has downside protection of a traditional fixed annuity.

What are some of the basic benefits of a Fixed Indexed Annuity?  


There are several benefits of a Fixed Income Annuity:

  1. Tax deferral is one the basic benefits associated with an annuity. They receive what’s call the “Triple Compounding” effect. Don’t pay taxes on initial premium, interest, or the taxes you would have been in a taxable investment.
  2. With a Fixed Indexed Annuity, you essentially have the best of both worlds – You get to participate in upside potential of a market indice but have the “Peace of Mind” knowing that you can’t lose anything because of the downside protection.
  3. One of the major benefits is the ability to create a lifetime income stream that can protect not only one life but two if there is a spouse involved.
  4. Guaranteed Death Benefit – The ability to name a beneficiary allows these funds to bypass probate – which is extremely time consuming and expensive.

What are some of the risks associated with income planning that can be addressed through the use of a Fixed Indexed Annuity?  


There are three major risks in retirement that make managing income different from building wealth.

  1. The risk of running out of money, or having too little money to live the lifestyle your clients want to live, is called longevity risk.
  2. The second risk is the corrosive effect of inflation on purchasing power.
  3. Finally there is market risk. We’ve all seen gyrations of the last decade or so. Folks retirement plans have been destroyed.


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