5 Types of Clients Who Should Consider Annuities

What You Need to Know

Annuities have an obvious role in retirement planning.
They can also help with diversification.
In some cases, they can be part of estate planning.

Too many advisors still avoid having the talk with their clients about the “‘A’ word.” Clients, on the other hand, are often looking for some of the benefits offered by annuities, even if they aren’t specifically asking for them by name.

What the client says:

“I’m afraid that I’m going to outlive my money.”
“I’m afraid that I’m going to become a burden to my children.”
“I’m afraid that if I enter into a critical care situation, I won’t be covered.”

Translation:

“Please educate me on the pros and cons of adding annuities to my portfolio.”

These very common fears create perfect opportunities for an advisor to educate clients about the income protection solutions and other potential benefits of annuities.

Adding annuities to a portfolio can be beneficial for various types of clients, depending on their specific financial goals and circumstances.

The Types

Some clients may not need annuities.

Here are some, but not all, who might benefit from incorporating annuities into their portfolios:

1. Retirement savers: Individuals who are approaching retirement or are already retired can benefit from annuities, as they provide a steady stream of income during retirement. Annuities can act as a form of longevity insurance, ensuring that clients won’t outlive their savings.

2. Conservative Investors: Clients who have a low tolerance for risk and prefer stable, predictable returns may find annuities attractive.

Some annuity features offer a guaranteed income stream, protecting against market volatility and providing a sense of financial security, while other annuities can help reduce the impact of down markets on the account value.

3. Tax-Efficient Investors: Annuities can provide tax advantages for clients seeking tax-deferred growth.

Earnings in annuities are not subject to immediate taxes, allowing the invested funds to grow without annual tax implications.

However, it’s important to note that annuity withdrawals may be subject to taxes when distributed.

4. Estate Planners: Clients interested in leaving a financial legacy for their beneficiaries may find annuities useful.

Certain types of annuities, such as deferred annuities with death benefit options, can provide a guaranteed payout to beneficiaries upon the client’s passing.

5. Asset Diversifiers: Clients looking to diversify their sources of income can consider annuities.