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Provide Peace of Mind in the New Year With These 10 Fixed Annuity Benefits
2016 has been quite a year. With regulations from the Department of Labor potentially changing the way you do business and interest rates staying low, there's a lot to consider before embarking on a new year of sales.
Your clients may also be looking back on the year in anticipation of retooling their financial portfolio. Many are rethinking their investments, given that they have faced, at times, a volatile market. In addition, your clients who are nearing retirement may be considering how to invest their assets to help sustain them for years to come.
To provide you and your clients with peace of mind during a time of uncertainty, fixed annuities may be one option to pursue in the new year. Fixed annuities help protect assets and guarantee a minimum rate of return, all while allowing for flexible payout options. Depending on a client's need for income, two annuity options are available: an immediate annuity, which can provide a payment stream immediately upon purchase; or a deferred annuity, which can be turned from an accumulation product to an income stream at a time of their choosing.
It's no surprise, then, that the popularity of fixed annuities has been growing over the past few years. According to data from the LIMRA Secure Retirement Institute, the first six months of 2016 saw $16.2 billion in fixed indexed annuity sales, a 30 percent increase from the same period in 2015.1 Traditional fixed annuity sales in Q2 2016 were 14 percent greater than the same period in 2015.
There are many benefits to fixed annuities that help your clients rethink a long-term financial strategy. Consider how you can play up these key attributes during your next client meeting.
There is always room for a fixed annuity as part of a diversified investment approach. A fixed annuity can provide a balanced solution to any client's portfolio by offering multiple guarantees, liquidity, flexibility, accumulation, tax deferral and diversification.
Fixed annuities can provide guarantees on the principal investment and interest rates, which can help your clients feel secure. In addition, some fixed annuities can provide a guaranteed return of premium ‰ЫУ even during the surrender charge period.
What clients don't realize about a fixed annuity purchase is the amount of accumulation potential that is available to them. A fixed annuity's compounded growth and tax-deferral status can grow savings faster than one may think. A year of tax-deferred growth can have a great effect on a fixed annuity's accumulation potential.
Another appealing aspect of fixed annuities is the ability for clients to choose a predictable income stream. Income options from a fixed annuity are numerous and can be tailored to a client's specific financial goals, such as to fund retirement. A lifetime income option provides a client with the control of selecting payments that are guaranteed to continue for the duration of their life.
5. Tax Deferral
The tax benefits of fixed annuities play heavily in the minds of many clients. Because earnings will not be taxed until withdrawals are made or regular distributions start, clients benefit from triple compounding: earning interest on principal, interest on interest, and interest on tax savings.
6. Wealth Transfer
Many people want to ensure their wealth is secure after they pass away. A fixed annuity is a great avenue for providing security to loved ones in the event of a death. A client might not be aware that death benefits payable to their heirs, especially large sums, could actually be a burden. The taxes associated with the proceeds could place beneficiaries in a different tax bracket and/or eat up a significant portion of an inheritance. Fixed annuity payments can help spread out that impact. An annuity can also help an estate avoid probate, allowing beneficiaries to receive annuity proceeds without delays and probate expenses.
When there are market uncertainties, consumers have a higher interest in liquidity. A client may hesitate to make a long-term financial commitment without flexibility and access to their funds, including creating an income stream should they need it. A client interested in using a fixed annuity as a tool to secure income for retirement can convert a deferred indexed annuity before or after retirement to create a liquid stream of income.
There are many fixed annuity options available, which allow clients to structure payouts according to their financial goals and objectives. Clients often worry that they will outlive their savings, but designations can be set up to help ensure that isn't the case. There are dozens of ways to set up payouts, but here are four of the most common:
- Joint life. This option provides income for two people, as long as either client is alive. When one client passes away, payments continue to the survivor.
- Period-certain only. This allows clients to target how long they need an income stream. If they pass away before the end of the certain period, remaining payments continue to the designated beneficiary.
- Life with a period certain. In this scenario, the annuity sponsor will pay out income for a client's lifetime. If the client were to pass away prior to the end of the certain period elected, the beneficiary receives the remaining payments.
- Life only. This is the least commonly selected payout. When your client passes away, payments cease ‰ЫУ no matter what. This can be risky, but the upside is this option provides the highest payouts.
9. Peace of Mind
A fixed annuity can be structured to ensure that if anything should happen to a client, the surviving spouse has a source of continued income in place. This type of payout structure can help in case of a catastrophic illness or the need for nursing home care.
10. No Sales Charges
With a fixed annuity, all of your client's premium can earn interest. Nothing will be taken away from your client's principal as long as the contract is continued, and the investment grows tax-deferred.
While serving your clients, remember to protect yourself as well. Work with a reputable annuities carrier that gives you the tools you need to best serve your clients, including customer service, and sales and marketing support. By giving clients reliability and value with fixed annuities, you will stand out as an exceptional insurance broker in a very competitive industry.
1 LIMRA Secure Retirement Institute: Second Quarter 2016 Fixed Indexed Annuity Sales Exceed Quarterly All-Time Record. LIMRA. August 16, 2016. www.limra.com
Confidence and Compassion
A Note from Greg Ness, Chairman, President and CEO
At The Standard, we’ve been helping people achieve financial well-being and peace of mind since 1906. As the global health crisis continues to disrupt lives, communities and the economy, I am confident we’ll continue helping people when they need us the most. Our company has been through hard times and market volatility before and we will navigate through this challenge as well. As our customers face tremendous stress and uncertainty, we will continue providing support and stability to those who rely on our products and services.
This pandemic is tough on everyone. Our communities are hurting, our families and friends are distressed and some of our most vulnerable neighbors are at risk.
The crisis and the way we collectively respond to it will define a generation. We are rising to the challenge. I know every single employee at our company — along with staying focused on keeping our business running and serving our customers — is looking for ways to make a difference for those most affected by this pandemic. That’s proving true in businesses and homes across the community, the country and around the world.
Part of the tragedy of this disease is that even as we come together to help those most in need, the unique nature of COVID-19 is forcing us apart. We all understand the importance of —social distancing— to slow the spread, but we should remember that’s just physical distancing. I encourage you to find ways to safely connect with those in your neighborhood who may require extra help and with groups in your community that are making a difference and support them however you can. And now is the perfect time to reach out to friends and others and just check in.
To our health care providers, first responders and everyone selflessly setting aside their own fears and concerns to help others during this time — thank you hardly seems enough. These people are true heroes. This crisis reinforces how reliant we are on the many essential services we too often take for granted. We are grateful to so many for continuing to show up with focus and commitment.
We will get through this, especially if we are sustained by the examples of those who make us the proudest right now — family, friends, neighbors and colleagues working together — rather than allowing our fears to guide us. No matter how unsettled we may feel, remember we are not alone. There are so many people in this world trying their level best to help others. And I am certain we will get through this — together.
In times of crisis, we are defined by how we react. Let’s continue to be defined by compassion.
And to our customers, thank you for putting your trust in The Standard. What we sell is a promise to be there when you need us, and that promise is unwavering.
Be safe and well, and stay connected.
Jared's Story: Time for Family
Age: 36 - Occupation: pediatrician - Married, one child
How the Family Care Benefit provided the ability to care for a loved one
Jared's daughter was born with a heart defect. They visited multiple specialists to diagnose the condition and determine the appropriate treatment. Then his daughter underwent surgeries, hospital stays and months of follow-up appointments. Benefits from Jared’s Platinum Advantage policy helped make up for the income lost when Jared spent time away from work to attend physician appointments and to be with his daughter in the hospital and throughout her extended recovery — providing peace of mind during a trying time.
Supportive Office Equipment
Age: 42 - Occupation: accountant - Married, no children
Assistance on the road to recovery through a rehabilitation program
Jody's role as an accountant at a small firm requires a lot of computer work. After sustaining a serious back injury from a car accident, Jody was totally disabled under her Platinum Advantage policy. Jody’s doctor recommended she purchase assistive equipment to help her work comfortably at her desk without aggravating her condition. She was able to return to work full time after participating in a rehabilitation program in which expenses for a sitstand desk and other ergonomic accommodations were paid for under her Platinum Advantage policy. These modifications helped ensure she could return to work safely, without hindering her recovery.
David's Story: Starting a Medical Career
Age: 33 - Occupation: dermatology physician - Single, no children
Benefits that match career growth through the Benefit Increase Rider
David is completing his dermatology residency and just accepted an offer at a private practice. Before the end of his residency, he purchased a Platinum Advantage policy that included the Benefit Increase Rider, knowing his income will rise significantly after he starts his first post-residency job. The benefit also will allow his policy to grow with him as he progresses in his career and receives additional salary increases. David values the fact that his coverage going forward will match his developing career.
Jason's Story: Accidents Happen
Age: 35 • Occupation: orthopedic surgeon • Married, two children
Finding work in a new occupation with the Own Occupation Rider
Jason injured his right hand in an accident and was unable to return to his job as an orthopedic surgeon because he couldn't perform surgery. Due to his medical training, he was able to return to work as a family medicine physician. Jason was considered totally disabled in his regular occupation as an orthopedic surgeon — even though he earns an income from another occupation as a family medicine physician — because of the own occupation definition of total disability included in his Platinum Advantage policy. Because of this, he receives the policy's full basic monthly benefit, in addition to the income he receives in his new position.