June is National Annuity Awareness MonthBlog added by Mike McGlothlin CFP®, CLU, ChFC, LUTCF on June 17, 2014
Mike McGlothlin

Mike McGlothlin CFP®, CLU, ChFC, LUTCF

Fort Wayne, IN

Joined: March 06, 2014

National Annuity Awareness Month spotlights the need for a financial vehicle that provides abundant client value and creates predictable income, but comes at the highest level of scrutiny. In June, we need to focus on the real benefits of annuities and maximizing those benefits for our clients.

Tax-deferred growth: With increased tax rates as high as 39.6 percent, it has never been more important to protect the growth of non-qualified savings. At a 3 percent growth factor, a $100,000 account would grow to $134,391 over 10 years. In a taxable account, taxes would account for $14,719. That’s $1,400 per year, which will make a significant difference for many Americans.

See also: Annuities and taxes: a complementary pairing

Alternative income: The average IRA balance at the end of 2012 surged to $81,100, according to a Fidelity Investments analysis of nearly seven million IRA accounts. For today’s near-retiree, the reality is that they do not have enough assets to live a comfortable retirement on interest only. We must look at vehicles that provide guaranteed income for basic living expenses. Annuities are the only vehicle that can provide lifetime income and longevity credits to increase payouts.

Peace of mind: More people are afraid of running out of money than they are of public speaking or dying in a plane crash. The year a person runs out of money is not their worst fear, however. It’s the months and years leading up to a zero balance that they fear the most. Retirees and their families experience a lot of anxiety knowing their income will diminish and their lifestyle will dramatically change. With a guaranteed stream of income, annuities can provide peace of mind like no other vehicle.

See also: Annuities: 5 things to expect in 2014

Annuities continue to be backed by an industry that has not defaulted on its clients. Even through the Great Depression, clients remained whole with the protections of our industry and its state insurance protection. In turbulent times, and uncertainty with interest rates, annuities continue to provide more value to clients than comparable no-risk investments.

Many public pundits continue to question the value of annuities, focusing on cost. Instead, our industry needs to turn the conversation to value. We need to focus on delivering solutions to clients needing guaranteed income, safe investments and tax-efficient distributions. Annuities are a great solution for many Americans.
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