In reality, most clients are looking at contracts that cover two lives and buying that guarantee for a little less income, Stolz says. Or, he says, the contract could cover a minimum number of years or a particular total amount.
“If a ‘life only’ payout option is selected, payments will stop when the client dies,” says Jill Perlin, vice president of advanced planning and sales training in Prudential’s Individual Solutions Group in Newark, N.J. “If a ‘joint and survivor’ option is selected, however, payments would continue to the remaining annuitant—typically a spouse or partner.”
You can also choose a death benefit option.
“The vast majority of annuities that are purchased for income have death benefit options for spouses and non-spouses,” says Lalla. “In fact, some death benefits guarantee a return of premium, regardless of investment performance.”
It all depends on which type of annuity and which options are selected.
Mostly At Or Near Retirement Age
It’s difficult to categorize exactly who buys annuities. Most customers are at or near retirement age, though some reports suggest the average is trending younger and younger. As measured by the LIMRA Secure Retirement Institute, most annuity buyers are between 58 and 67.
“Annuities can be for anyone,” says David Hanzlik, vice president of annuity and retirement solutions at CUNA Mutual Group in Madison, Wis. “While all annuities provide annuitization options that allow you to turn your assets into an income stream to protect against longevity risk, there are also numerous other risks annuities can help protect against, such as protection against market risk.”
Married With Children?
Lalla says the majority of his clients are married; only about a quarter of them have children living in the household. If a client has dependents, it can influence the type of annuity he or she buys.
“For example, consumers without dependents might prefer an annuity with the highest level of income but a less advantageous death benefit, such as a single premium immediate annuity,” says Lalla. “Those with dependents may be looking for an annuity that allows them to pass on some of their assets. Variable annuities with a guaranteed lifetime withdrawal benefit offer the potential for a greater death benefit and greater flexibility for the owner.” That flexibility is primarily due to the fact that variable annuities offer a variety of mutual-fund-like subaccounts to invest in.
Stolz stresses that annuitants come in all shapes and sizes. “Annuities may be more attractive to those with dependents, simply because they’ll want to make sure an income continues if they predecease their spouse,” he says. “But an annuity can work equally well for people with or without dependents.”