The tides have changed with Retirement Advisors and their attitudes towards annuities. For years, advisors talked their clients out of annuities because of potential high fees, restrictions on distributions and that they were just too complex for the average person to understand. Now that longevity is a reality for many retirees and they are dangerously close to depleting funds saved because they have just lived too long, annuities are looking like suitable solutions.
Here are some basic advantages annuities might have for your clients that are easy enough for them to understand.
- Diversification – no need to put all their assets in one basket. Adding an annuity to their portfolio will defer some risk.
- Inflation – market investments are doing well now, but we know that it won’t always be that way. Compound interest from an annuity might help offset the effects of inflation.
- Liquidity – there are numerous annuities that offer flexible guaranteed withdrawal options that would allow your client to withdraw without paying any charges or penalties.
- Federal Income Taxes – income from interested credited to an annuity is currently not taxable by the federal government, unlike checking/savings accounts, CDs, stock mutual funds and dividends from common stock. Clients wouldn’t have to pay taxes on their annuity interest until they receive a distribution and that is usually at lower income rates.
- Guaranteed Retirement Income – distributions from annuities can be scheduled to be the same amount, regardless of interest rate decline and with a life income rider, their distributions could be lifetime.
- Cost of living – with the appropriate annuity, there may be no market risk, clients can expect 100% return of investment in addition to returns ON their investment, there by actually increasing their after-tax income.
- Avoiding probate for heirs – an appropriate life-insurance policy can avoid probate and delivers tax-free insurance. Clients that list someone other than their estate as beneficiary also eliminates probate fees, costs and delay in receiving funds to heirs.
There are many different choices when it comes choosing the right type of annuity for you. Make sure to work with an independent financial advisor that will give you an unbiased opinion on which type you should purchase.