Filed Under:Your Practice, Sales Marketing

Money for life with a fixed annuity

Financial professionals who help clients transition into their retirement years are well aware of the current intense focus on predictable income. For many, the challenge is finding a product solution that appeals to the client’s desire for income security and growth potential while also providing some measure of flexibility so that the client need not lock money away completely to achieve the desired benefits.

Annuities, in one form or another, are proving useful to help clients with their retirement income needs. In a survey released in September of 2012 by the Insured Retirement Institute (IRI) and Cogent Research, roughly 84 percent of financial professionals reported that they are having more conversations about retirement income than they were five years ago. Additionally, this same study found that more than 70 percent of financial professionals using annuities said their clients had asked to purchase an annuity.

The second incentive involves the opportunity to capture potential income growth based on changes to an index (such as the S&P 500® Index) during each contract year. This potential growth through income credits (subject to an index cap), combined with the “step up” benefit mentioned above, may give the client a higher benefit value base, which is used to determine the amount of income payments.

These new income fixed annuity products may even ease the uncertainty clients may often feel when locking into typical annuity contracts. In this case, if a client decides after 10 years that other income sources are enough to provide security, or if an inflationary period makes the annuity seem less desirable, he or she can forego taking advantage of the “step ups” and index-linked income credits and simply take out the annuity’s principal and move on. This kind of flexibility can be reassuring both at the time of sale and for the life of the contract. Surrender charges will apply if the contract is surrendered within the first nine years. Early withdrawals and other distributions of taxable amounts may be subject to ordinary income tax and if taken prior to age 59-and-a-half, an IRS 10 percent premature distribution penalty tax unless an exception applies.

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Nichole Morford

Nichole Morford
Managing Editor

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