By Brendan Connerton
In light of the recent market and interest rate volatility, it’s important to take a moment and reinforce why annuities are sold in uncertain economic times. Annuities are a protection and safety product and provide three distinct benefits - GPS:
- Guarantees – Principal protection and guaranteed lifetime income.
- Predictability – Income that has the ability to grow and counter inflation and price increases.
- Stability – Highly rated insurance companies back the guaranteed income payouts that annuities provide.
Index annuity products provide retirees significant value in uncertain economic times. We have seen multiple market corrections over the past year, and even as recently as March 23, when the Dow fell an additional 3% and the S&P 500 dropped 2.9%.
Clients who owned principal protected index annuities did not experience any loss during these market corrections. Guaranteed income amounts paid to retirees do not change during volatile market time periods.
Here are a few talking points on the value of annuities and why pre-retirees and retirees should consider annuities as a solution in retirement:
- Principal protection - Index annuities protect principal and participate in index growth. “Zero is your hero” in down market or volatile market environment.
- Lock-in gains - Index annuities lock-in gains with annual value step-ups. Once interest is locked in on the contract anniversary, it is principal protected.
- Tax advantages – Annuities are a tax-deferred investment. The client is not taxed while the annuity is earning interest.
- Wealth transfer – Annuities have death benefit options. If you have uninsurable clients, make sure to leverage annuity products before walking away from opportunity.
- Higher rates – Tax-deferred fixed annuities generally provide higher returns to investors versus other fixed investments such as certificate of deposit.
- Tax-advantaged distributions – Annuity products can provide tax-favorable payout options on investments with large taxable gains.
- A happier and healthier retirement – Retirees who own annuities or have sources of guaranteed income have a happier and healthier retirement versus people who do not have guaranteed income.
In these uncertain times, a sense of certainty is something people value and appreciate. Annuities may provide that certainty to the clients. If you haven't looked at annuities with your clients in the past, this might be the perfect time to start the conversation.
Brendan Connerton is director of annuity sales for Crump Life Insurance Services’ Annuity Solutions Center. Brendan may be contacted at [email protected].
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