Is An Immediate Annuity Right For Your Client?

One particular topic I receive many questions about is the benefits of an immediate annuity. “How do I know if an immediate annuity is the right choice?” “What can I expect from it?” Like any other insurance product or financial service, it all depends on the client, their intended lifestyle and how they want to shape their future.

There’s no denying it—Americans are living longer than ever—and this extended life span tends to be a result of us living much healthier, happier lifestyles. Seems ideal right? Of course; except when you outlive your retirement savings.

With the constantly fluctuating costs of healthcare and inevitable inflation for some of the most necessary goods we consume, it should come as no surprise that the longer we live, the harder it is on our finances—exactly why many are turning to immediate annuities.

A single premium immediate annuity (SPIA) can help mediate the financial strain by providing the individual with an income stream that they can never outlive. Typically, the most common annuity products are intended to build value for retirement, while in comparison immediate annuities are designed to provide a steady stream of income immediately, upon retirement. 

So how exactly does it work?

An immediate annuity acts as a contract between the client and you, the insurance company.  Typically immediate annuities are purchased with a large sum of one’s savings, and then used to pay for expenses over an extended period of time. As the insurance company, you will use the client’s very hefty payment to distribute a monthly income to the individual for as long as they live.

It’s true—the older we get the more our income needs increase; there really is no escaping it.  So why allow your client to put their comfort and future at risk? Retirement and annuity products should certainly be discussed at an earlier enough stage in life, but keep in mind this is your client’s life and their decision. If there is no need to rush and have no immediate need for income it’s often in the client’s best interest to wait. Remind them that the payment amount is based on life expectancy, so the shorter the life expectancy and the older the individual ages, the larger their income payments can become.  

Like any important decision, there are pros and cons to purchasing an immediate annuity. Make sure to discuss all options available with your clients—keeping in mind that their happiness and financial security is the top priority.

Gary Hall, President at Hall, Mahar & Associates, has been at the California insurance agency for 22 years. Hall, Mahar & Associates specializes in business and personal lines necessities such as California home insurance, California auto insurance, as well as specialty endorsements like California earthquake insurance.

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