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What Annuity Is Right For The Client?

Robbin Broome

During the last two decades, seniors have experienced a roller coaster financial market. Products are constantly changing, and I am always informing clients about some policy variation. Volatility seems to be the wave of the future.

With all this said, what should you look for in an annuity? After all, it is your financial future in question.

Individuals need to ask themselves a few questions before purchasing any product in today’s environment. For instance:

  • What are my goals for my money?
  • Am I going to use it or save it for my family?
  • Do I need these funds now or later?
  • Do I need income or growth?
  • How long before I will be using these funds?
  • What are my immediate liquidity needs?
  • Do I have an emergency fund?
  • What is the purpose of these funds?

These are just some of the questions you need to answer before advisors start offering suggestions.

I have met many people who were peddled an annuity or investment for the sake of the sale. It is disheartening to see people being locked into products that they do not need and cannot easily escape from. Many thought they were meeting with a financial planner when in reality they were hoodwinked by a good salesman.

As a result, insurance companies had started adding compliance changes over the years. We want to restore people’s faith in financial planners. The majority of agents have their clients’ best interest at heart, but bad apple’s still exist. So, insurance companies must keep business clean, and clients must research the available financial agents to find a good fit.

This brings me back to my main point. How can you find the right annuity for your retirement? First, you need a passionate financial advisor. Second, you need to be informed about your options and know how you want to use an annuity.

People may want to use this product for legacy planning or passing to a charity. With no fees, just a standard annuity platform, the fixed annuity could be the solution.

One of the most popular products today is the fixed index annuity (FIA). It guarantees no loss of principal and shares in the upside earnings of the index because the guarantees are backed by insurer’s claims-paying ability and the financial strength of the issuing company. However, retirees may still need some time to accumulate wealth before withdrawals. Since, they may intend to use the Living Benefit Rider for lifetime income or use the free withdrawals and keep the cost down.

Personally, I think the best of these products are the uncapped strategies. The multi-year crediting on uncapped strategies has the potential for an overall higher return if withdrawals are not used on the accounts. Also, the ability to tag health care to some of these products can be very beneficial to the clients. This product is a little riskier than the fixed annuity. Individuals can experience flat years with no returns if the index performance falls below the grid.

Retirees also need to be aware of the variable annuity. This annuity participates in the market. If you want to consider growth in mutual funds and still get the benefit of tax deferral, you might like this annuity. With a variable annuity, individuals must consider the level of risk and the charges incurred. Normally, this product possesses higher fees than other types of annuities. Of course, all of the annuities we have discussed thus far also have surrender charges. These charges can affect policies’ early years, which is why retirees should always consider their liquidity needs before purchasing an annuity.

To truly discover the right annuity for you, become involved and provide suggestions to your financial advisor. By learning about the product, you can make wiser decisions about your retirement goals.

About the Author:

Robbin Broome has been in the financial services industry since 1988. His entry into financial planning was with a large firm called Primerica Financial. Their core philosophy was “buy term, and invest the difference.” While Robbin agreed that the philosophy was good for many, he felt it didn’t address the needs of all clients.

He desired something more than a one-size-fits-all approach. In short, Robbin felt his clients would be better served with an independent firm, one that afforded him the ability to work with multiple insurance and investment companies to provide solution-based plans. It was this desire that led Robbin to start his own practice, Robbin Broome, Inc.

If you would like more information about Robbin Broome, Inc. and “The SMART Lifestyle,” call my office at 864-859-4778 or email robbin@robbinbroome.com. Listen to our radio programs by going to www.thesmartlifestyle.com, click on radio, and hear previously recorded shows. Also, visit us on Facebook at the S.M.A.R.T. lifestyle/Facebook and like our page.

 

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2 Comments

  • Dom Marucci says:

    At 80 years, currently heavy into mutuals for decades; What would be the best annuity type choice, but with liquidity for possible family support, if any?

    Regards,

    Dom

  • Sorry Dom for the delay in replying but to answer your question I think you have only two options. First I would look at a fixed annuity that will allow income for life. The second is a fixed index annuity with a lifetime income rider. These are the best options for your age to preserve your current wealth with least amount of potential loss. Hope this helps.

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