NAILBA Perspectives Winter 2020 - Page 30

ANNUITIES

What ’ s better than a paycheck for life ?

If your prospects have never heard of annuities , there are some great things you can share with them , in order to make them receptive .
Sheryl Moore is President and CEO of the life and annuity market research firm of Wink , Inc . Her company provides competitive intelligence , market research , product development , consulting services and insight to select financial services companies . She may be reached at sjm @ intelrockstar . com .
Annuities — has options to fit every risk tolerance ; offering a single , unique feature that no other retirement savings instrument can — a monthly paycheck for the rest of your life .
30 Perspectives Q4 2020
Different approaches
Some people plan to invest in their home , fix it up , and eventually sell it when they are ready to retire — then live off the proceeds . Others may own a business , which they plan to sell in preparation for retirement . However , most average Joes , like us , use different instruments to save money , in preparation for retirement . The 401 ( k ) is likely the most recognizable of these instruments . However , other instruments such as Certificates of Deposit ( CDs ), mutual funds , stocks , annuities , and even life insurance ( crazy , right ?!?) can be used to help one save their money for retirement .
Each of these retirement vehicles is suited best for a different risk tolerance , or the amount of variability in returns that a purchaser is willing to withstand . The idea of risk tolerance is an important one to grasp .
Low risk Moderate risk High risk
Low potential for gains , but no losses
High potential for gains and losses
Each of these instruments also has their respective costs and their benefits . Yet among these , one instrument has options to fit every risk tolerance ; offering a single , unique feature that no other retirement savings instrument can — a monthly paycheck for the rest of your life .
Worth repeating
Even if you live to be 150 years old , an annuity will send you a paycheck every month for the rest of your life . Even if you paid $ 150,000 into the annuity , and the insurance company has sent you $ 1,500 per month for 8.34 years ( and you ’ ve essentially gotten-back what you paid-in ), you will continue to receive the $ 1,500 per month .
While this example is merely that — an example , it drives home the most valuable feature that exists in every annuity : a guaranteed paycheck for life that nearly everyone is interested in . Until the mention of the word “ annuity .”
What you think vs . what it really is Let me help you understand what an annuity is , as opposed to what you may have heard . Technically , the definition of an annuity is a financial product that facilitates a sum of money being payable annually , or more frequent intervals . If that sounds familiar , that is because it probably is . Social Security , winning the lottery , or even old pensions of yore are all paid out as annuities . The difference is an annuity is a pension that you provide for yourself .
It also has a tax deferral feature that isn ’ t available through some retirement savings instruments . The IRS has provided favorable tax status to annuities , in order to provide an incentive for Americans to save for their own retirements . So , you don ’ t have to start paying taxes on the money that you put into an annuity , until you begin taking money out of the annuity .
If all of those things sound good , believe it or not , an annuity may just be right for your prospects !