While fixed annuities are popular in an environment where downside protection is top of mind, VAs, RILAs and a variety of other annuity products may be worth considering depending on your client’s goals—particularly if upside growth is a priority.
Myth 3: Once you invest in an annuity, you’re stuck with that option. The annuity industry has seen many changes over the course of its history. In the past, some annuity providers locked in products and beneficiaries upon purchase, making it impossible for investors to make adjustments when circumstances shifted. The good news is annuity products have evolved, product development has progressed and the industry has focused on becoming more investor centric.
Most annuities now include free withdrawal provisions, which allow contract owners the ability to withdraw a designated portion of their funds—often 10 percent each year—without incurring a surrender charge. Others have waivers that allow access to account values without penalties if triggering events occur, like hospital stays, nursing home admissions or terminal illnesses, to name a few.
The reputation annuities gained in the past for being inflexible is rapidly becoming outdated. Annuity providers have become more sensitive to the reality that sometimes life forces investors to flex their strategy—and they are here to help when that time comes.
Myth 4: Financial services providers are on shaky ground. The financial services industry has felt the impact of this past year’s turbulent markets and high interest rates as well as the additional struggles in the banking industry. These events may be making some investors wary about purchasing an annuity in the new year, however, you can reassure your clients that annuity providers are still strong and stable. In fact, S&P Global said the US life insurance sector is one of the most highly rated and stable sectors the firm tracks, with 91% of the rated companies in the AA or A rating categories.
Advisors should stay up to date on carrier ratings and guide their clients toward companies that are strong and stable, ensuring they are investing in products that will help them weather any storm. The good news is there are a variety of solid carriers to choose from in today’s market.
A turbulent economy over the past few years has served as a powerful reminder that retirement savers need to prepare for the unexpected. The protection annuities offer can be an attractive solution for those who can’t afford to simply hope for the best in an uncertain future. It’s healthy for clients to have questions, concerns or even reservations about costs, flexibility or the type of annuity that may best fit their needs. However, as their trusted advisor, you can work with them to address misperceptions they may bring to the table with facts, options and a clear understanding of your client’s specific retirement goals.
Rona Guymon is senior vice president at Nationwide Annuity Distribution.