• Bad investment/spending decisions wasting the asset — an annuitization option can provide a set income stream for a set period of time. And, because of annutization, the beneficiary does not need to manage payments or allocations — it basically takes care of itself.
• Divorce of a beneficiary can cause issues with ownership of assets — the annuity can be set to provide income to a beneficiary directly regardless of marital status.
• Spendthrift beneficiary who doesn’t manage money well — again, the annuity can provide a set income stream for a set period of time through annuitization or forced deferred stretch payments
• Deception or fraud — a predetermined payment option can help control the distribution of the funds automatically so there is less opportunity for abuse.
Income Continuity
Mitigating risk by leaving stable income for the surviving spouse can be important for many reasons. Let’s look at a few examples and how an annuity may help in these situations.
• Protecting pre-death standard of living — an annuity (an annuitized joint and survivor annuity) can provide annuity payments that continue for the life of the survivor.
• Helping the survivor avoid asset management decisions if the surviving spouse is not comfortable making those decisions — annuitized annuities are designed so the owner can experience lifetime annuity payments without demanding any day-to-day expertise.
• Reducing risk of financial abuse — an annuitized annuity will provide lifetime annuity payments. That adds a level of protection if owner is tempted to spend or give away larger amounts of money.
Once your client has identified their retirement income needs, the next step is to make sure your client has appropriate lifetime income sources (e.g., Social Security, pension income, annuities) to help meet those needs.