When it's right to recommend an annuity, consider these four

By Marshall Heitzman, Vice President, Advanced Planning Consultant at TruStage™

Annuities can be powerful tools, yet they aren’t the right strategy for everyone or every situation. The variety among annuities necessitates careful consideration to determine their effectiveness for each client’s unique circumstances.

Some clients seek to accumulate savings, others want a dependable income ("paycheck") to supplement their retirement income, and some prioritize their legacy. This article explores four powerful categories of annuities and when each makes good sense.

1. Registered Index-Linked Annuities

Jonathan, a client focused on both leaving a legacy and accumulating wealth, wants to participate in the market’s growth potential while enjoying guaranteed loss protection.

A registered index-linked annuity could be a suitable option. This annuity type links gains or losses to a market index's performance and addresses various needs at different life stages: accumulation, income, and legacy.

• Downside protection: Jonathan can set a risk limit, ensuring he doesn't lose more than that amount, regardless of market conditions.
• Upside potential: Unlike conservative investments, this annuity allows Jonathan to participate in market growth, earning interest linked to market performance, up to a cap.
• Control risk: A customized comfort zone enables Jonathan to lock in gains and avoid losses.

2. Variable Index-Linked Annuities

Karen, a long-term client, is committed to staying invested for the long term and weathering market volatility. She likes the idea of splitting her assets between variable subaccounts and two risk-control platforms.

A variable index-linked annuity could be an ideal solution. This innovative investment platform combines the flexibility and growth potential of variable funds with customized risk control.

• Diversified investing: This approach allows even cautious investors like Karen to diversify for higher growth potential.
• Protection for a portion of assets: Risk control accounts offer guaranteed limits on loss.
• Stay in the market longer: The combination of diversification and protection can give Karen the confidence to remain invested through volatility.

3. Income Annuities

Maria, in her early 60s, is thinking about financial security and wants a guaranteed lifetime income solution. She also wants an option that adjusts for future cost-of-living changes.

As Maria approaches retirement, she can help establish a steady income stream by using an income annuity.

• Fill in the gaps: Social Security only covers so much. Maria can replace her paycheck with income to help cover critical retirement expenses.
• Customized options: Flexible payment types and ways to protect beneficiaries let Maria design an income plan that suits her goals.
• Guaranteed lifetime income: If Maria is worried about outliving her savings, an income annuity can help ensure her savings last as long as she does. Alternatively, she can choose a period certain option.

4. Fixed Annuities

Alex aims to accumulate wealth and leave a legacy but is cautious about market fluctuations. He wants a strategy that allows him to confidently plan for a precise retirement goal.

A fixed annuity offers Alex relief from market volatility, providing a stable, tax-deferred way to grow savings and guarantee income for retirement.

• Lock in a rate: Fixed annuities provide reliable returns with competitive, guaranteed rates in an uncertain environment.
• Defer taxes: Unlike other conservative investments like CDs, no taxes are paid on annuity earnings as they accumulate, allowing money to grow faster.
• Protect principal: Alex can stop worrying about market fluctuations. His retirement savings can grow without the risk of loss.

There’s no single best way to fund retirement. Some clients want guaranteed income, others desire risk-controlled growth, and some need death benefits to provide for loved ones. Clients like Alex, Maria, Karen and Jonathan can find the right products for their needs within this family of annuities.

Annuities are tools that can be highly effective when used in the right scenarios, depending on specific facts and circumstances. Learn more about TruStage Annuities.