Annuities– such a simple concept. Yet, there are so many options out there, it becomes overwhelming for any advisor– much less the average client!
Do you find yourself researching annuities with retirement income in mind, only to find confusing and conflicting answers?
Let’s break it down. We identified the top 12 client questions –and answers- to get right to the point.
Q: Can I lose money?
Immediate, fixed and fixed index annuities are guaranteed by the insurance company that issues the contract. Your principal is protected by the claims-paying ability of that company.
Of course, excess withdrawals may result in surrender charges. If you are under 59 ½ and make withdrawals, you are subject to additional tax penalties.
Q: Will I pay a lot in fees?
Unlike Variable Annuities, which have an investment feature (and fees that can get as high as 8% in our experience), the annuities we promote at Wiig-Codr either don’t have fees for the base contract, or have low fees for additional riders that are chosen– such as inflation protection, lifetime income, spousal continuation, death benefit, etc. Those fees are typically around 1% each.
Q: Will my cashflow fluctuate?
Fluctuating means your income can swing up and swing down from month to month, or year to year, however you have it set up.With annuity strategies, your income can only go up. They are designed to provide a hedge against inflation. The worst-case scenario is that you stay the same. Your cashflow will not decrease, that you can be assured of.
Q: Will we be able to keep our money if one of us becomes ill or passes away?
There are many annuities or additional riders that have waivers for terminally ill or premature death situations. Some annuities provide double –or even triple– your income for qualifying healthcare expenses. In addition, many annuities feature additional riders that offer death benefit provisions as well.
Q: Can these annuities provide me with income for the rest of my life?
With a Fixed Index Annuity, you can select the option to purchase a lifetime income contract. Some are structured that way, some add this feature through a rider for an additional cost, but yes– the annuities we offer have an income-for-life benefit.
Q: Does my income have the potential to grow to keep up with inflation?
This is something people often don’t think about, but we do! In our annuity strategies, we leverage annuity features and riders to help ensure our clients’ income grows as the cost of living increases. We want you to retain the purchasing power of your money.
Q: Will I completely lose access to all my money?
You don’t have to annuitize. You want to make sure you select the right annuity type and features for your own unique situation, but most offer up to an 10% annual withdrawal without penalty, as long as you’re over 59 ½.
If push comes to shove, you have the ability to get more –even all of it– but in that case, there may be signficant surrender fees. It depends on the annuity. Typical annuities have penalty periods for 3-15 years, with a sequentially decreasing percent charged against your withdrawal funds for excess withdrawals or full surrender of the contract.
In other words, be careful about purchasing an annuity with money you think you may need in the short term.
Q: Can I get even more income by “laddering” annuities?
Oftentimes, with well-planned-out annuity strategies and payout management techniques, using more than one annuity for income -engaged at specific points in time- can net most people with higher monthly and annual payouts.
Q: Is it possible to provide income to my spouse, children and even grandchildren with my IRA or 401K asset?
There are multiple ways to enhance a legacy through the use of the “stretch annuity.” We have the ability to provide a qualified carrier and the illustrations to support that concept.
Q: In an Annuity, will my money grow?
Annuities pay Guaranteed Interest rates, and your money will grow three ways:
• Guaranteed Interest on your principle
• Guaranteed Interest on the interest compounded annually
• Guaranteed Interest on the tax saving, growing taxed deferred
Q: At death will my money be stuck 3-5 years in Probate?
Annuities bypass probate and monies are paid directly to the named beneficiary immediately.
Q: What if I filed bankruptcy or if I am sued, will my annuity be protected from a creditor?
There are a few states that have laws in place where annuities can provide protection from creditors and frivolous lawsuits. Two prime examples of those states are Texas and Florida. Both have specific statutes in place that can protect your annuity and life insurance assets from the litigious world that we live in.
State law also defines creditors’ ability to collect against annuity assets, and in those cases, the provisions are much more varied. In some states, annuities are treated as being similar to IRAs and other retirement accounts, with the result being almost complete creditor protection.
Call Rich Mangiameli, Director of Annuities at Wiig-Codr Underwriters Co. for your next annuity case, or any questions about the benefits annuities provide to your clients.
Call 402-498-8000 or email email@example.com