Annuities are best used to fill gaps between other investments, according to Karen Demasters of Financial Advisor Magazine. In the article, “Annuities Can Fill Investing Gaps, Advisors Say,” she stresses the importance of advisors being educated about the value of annuity products. Most consumers are confused about all of the different kinds of annuities and the benefits that they have to offer, so it’s crucial for advisors to know what products are out there and how they might be able to help their clients. This is especially important because sales of annuities have been steadily increasing, as have the number of products out there. The Insured Retirement Institute reported a nearly 10% increase in annuity sales between the second quarter of 2013 and the second quarter of 2014.
New annuity products are introduced into the marketplace on a regular basis. So even though some insurance companies have decided to stop selling annuities, the number of new products appears to mitigate the impact of those lost. One financial advisor said that he has seen ten new annuity products introduced in the past few months. The Essential Income 7 is Allianz Life’s newest fixed income annuity product. You can add the Essential Income Benefit, which creates a lifetime income stream for an added cost. Annuity products also offer a variety of other riders that can be added for an additional cost. You can get guaranteed lifetime income, long term care insurance and death benefits to name a few.
Confusion can arise because of the different costs and regulations associated with different annuities. Advisors must be well-versed so that they can give the correct information to consumers. Insurance companies follow suitability guidelines and work with advisors and consumers to ensure that financial goals are met. One important benefit of annuities that isn’t always front and center is that they free up the rest of your money for more aggressive investing. When you purchase an annuity that guarantees income for life, you can aggressively invest your other savings in the hopes that that money will see large returns.
First, consider every source of income that you will receive during retirement. Use annuities to fill the income gaps between what you’ll be receiving and what you expect your expenses to be. While you don’t want to invest your entire retirement savings into annuities, they are important for their income guarantees. It’s one of the only ways to protect your principal and receive guaranteed income. There are advisors who don’t know that annuities offer full principal protection, so that’s an important piece of information to get out there. The money that you have in an annuity is also protected from creditors in some states. There are state guarantees for annuity products of differing amounts as well. If annuity information starts with the insurance companies and trickles down in an accurate way to consumers, most people could benefit from the options available in their financial planning.