They come in many varieties, with innumerable options and add-ons. But whatever the flavor, annuities are broadly considered a good option for maintaining retirement income.

“The retirement income challenge is real and growing—and annuities are one of the only sources of guaranteed income that clients can’t outlive,” says Craig Hawley, head of Nationwide Advisory Solutions in Louisville, Ky.

In essence, annuities are contracts that clients make with an insurance carrier. How the funds are invested and how disbursements are made may vary. But the promise of a payout is guaranteed. For many clients, the only question is when. What are the consequences of turning on the income spigot at one particular time over another?

No One-Size-Fits-All Answer

The answer, insists Hawley, “has to be part of a strategic plan.” That’s because what’s best for any client depends on a multitude of variables. What is the client’s income need? What other sources of income does the client have? How is the client’s health—and life expectancy?

Just as every client is unique, so is every annuity. “An annuity’s income features are generally designed to be employed at age 65,” notes David Lau, founder and CEO of Louisville, Ky.-based DPL Financial Partners, an insurance and annuities consultant primarily to registered investment advisors.

The Argument For Waiting

But it may be better for the client to wait until he or she is beyond 65 to take the income, says Lau. Typically, he says, it is “not beneficial to wait unless the product has deferral credits. Deferral credits can increase the payout amount in certain annuities, which may make delaying taking income advantageous.”

For some annuities, payout amounts increase when the recipient “ages out of one age band and into a new one,” explains Woodland Hills, Calif.-based Bryan Pinsky, senior vice president of individual retirement pricing and product development at AIG, a leading annuity provider. “Payments for other annuities will grow over time—either by a guaranteed rate or by market- or index-based performance—and then may get locked in after a fixed number of years.”

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