Annuities have been around for a very long time and have been successfully used to provide an income stream and financial security for those planning for retirement. Annuities were first referred to in the United States in 1740 as a means by which the Presbyterian Church could financially provide for “clergy and widows” within their parishes. Designed to offer tax-deferred growth, annuities provide a guaranteed income stream which begins at a designated time when money is most needed by the annuitant.
Annuities are considered for a variety of planning scenarios:
- allow clients to maintain a comfortable (pre-retirement) lifestyle;
- help clients prevent the risk of outliving their money; and
- allow clients to plan for the “unexpected”.
According to an Employee Benefit Research Institute (EBRI) 2019 Retirement Confidence Study, paying for Long-Term Care (LTC) is the third greatest retirement concern for individuals ages 60 – 75 behind healthcare costs and cuts to Social Security. Retirees admit that they are very uncertain about their ability to pay for LTC expenses and studies show that Boomers, Late Boomers and Gen-Xers are at risk for a shortfall in retirement – by more than 40% in each population! The largest contributing factors for this shortfall are healthcare and LTC costs! While your clients may not be able to do anything about rising healthcare costs or cuts to Social Security, they can take immediate action and make planning for Long-Term Care a priority!
As a part of his assets, Steve holds a Variable Annuity that he purchased 25 years ago with a $50,000 deposit. The policy has performed well and is now worth about $250,000. Steve expects to draw down his other assets in order to maintain his desired lifestyle and plans on taking withdrawals from the existing Variable Annuity for ANY “emergency expenses” that come up. He would, however, be required to pay taxes on the withdrawals.
Steve’s advisor has taken the time to get to know him and to understand his financial goals and fears. He recognizes that Steve’s current Variable Annuity may no longer be the right fit for his goals at this stage of his life. As a result of this close relationship, Steve’s advisor recommends that he upgrade his existing Variable Annuity to a Hybrid Annuity with a Long-Term Care rider. The upgraded Annuity will better help Steve achieve his planning goals:
- Continue tax-deferred growth of assets;
- Reduce asset exposure to market volatility;
- Plan for tax-free asset distribution;
- Allow for asset availability to cover emergency and Long-Term Care expenses or to create an additional income stream; and
- Guarantee unused assets as a legacy benefit for designated beneficiaries.
While you and your clients can never be sure a Long-Term Care event won’t happen, you can be certain that your clients will feel secure with a guaranteed Annuity policy in place that addresses any LTC need that might arise. The advisor’s solution gives Steve peace of mind while affording him the flexibility to maintain a cash value asset or provide a legacy benefit to his heirs. A win-win solution either way!
Please call AgencyONE’s Annuity Department at 301.803.7500 for more information or to discuss a case.