Financial advisors should step into the void created by their clients’ lack of knowledge about annuities, according to Dan Keady, chief financial planning strategist for TIAA, a financial services and retirement planning firm based in New York City.

Despite the increasing level of sophistication about financial products among consumers, myths still surround annuities, said Keady, a proponent of annuities as part of a retirement plan. Advisors' first job is to find out what their clients do not know and then help educate them, he said.

“Financial advisors are immersed in this information all the time, maybe for years, and they may forget that not all of their clients understand the nuances of financial products,” he said. Many myths still surround annuity products, he said, which can be a useful tool to provide lifetime income as part of a retirement plan.

For instance, many consumers still think that if the owner of an annuity dies shortly after buying it, his or her money is lost. “Virtually all annuities offer an option for a guaranteed period of payment, which means you or your heirs will receive payments for a pre-determined number of years no matter what,” Keady said. “Usually, these guaranteed periods can be 10, 15 or 20 years long. The term you choose will impact the amount of your payments.”

Some people still want to rely on withdrawing money from their savings to spend during retirement, but that money could run out, forcing drastic changes later in life.

In addition, many people still feel annuities have high or hidden fees, Keady said, when in fact, fees vary and an advisor can help direct a client to low-cost annuity products.  The same thing applies to finding annuities with flexible provisions. Some will allow rebalancing of investments even after payments are started.

“Annuities can provide a wide range of flexible options for growth potential and receiving income,” Keady said. “When used with other retirement savings options, annuities can help you create a diverse retirement income strategy” for clients

“Advisors should approach a client by finding out what they are trying to achieve and how they envision their retirement income,” Keady noted.