With the combined impact of a looming American retirement crisis and the transition in the advising industry to a fiduciary approach, there is an increasing need for advisers to provide guidance to clients on the methods of generating and managing income streams in retirement.
The way Americans fund retirement has shifted. Few workers have access to employer-backed pensions. More people are self-funding their retirement through 401(k)s—if they have access to them—or other savings, and many can’t save enough. Even for those who are “on track” with their savings, the 2008 financial crisis serves as a stark reminder of what can happen to a stock portfolio “nest egg” when retiring in a down market.
Investing in defined contribution products is only one part of the approach to solve this challenge for clients. Fiduciaries have a duty of care to also provide advice on how the products invested in will function as income sources in retirement. Research suggests clients will also be receptive to this type of advice – as 68 percent of consumers say they would be interested in a product that provides lifetime income.1
However, the same research showed that 54 percent are unaware that annuities provide this benefit.1
When combined with an optional benefit‡, annuities are uniquely positioned to offer protected monthly income for life – bridging clients’ income gaps when social security and other savings are insufficient. This lifetime guarantee† lets people live without worry, confident that their income stream will be there when they need it most.
When you consider both client need and fiduciary responsibilities, it is clear that there has never been a better time to make annuities part of a broader conversation about savings and retirement planning.
What is an annuity:
An annuity is a long-term, tax-deferred vehicle designed for retirement. Variable annuities may involve investment risk and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½.
† Guarantees are backed by the claims paying ability of the issuing insurance company.
‡ Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity.
Investing involves risk, including possible loss of principal.
1 Insured Retirement Institute and Jackson, “The Language of Retirement,” June 2017.