Fixed Index Annuities – a Mix of Attitudes and Attributes

Sub Headline: Annuities’ guaranteed lifetime income could solve some of the most common fears of retirement.

Synopsis: The fast-paced sales of fixed index annuities reflect consumers’ changing attitude about insuring their retirements as they’ve done for their real estate property. The attraction of guaranteed lifetime income should be considered against other product options and liquidity. Watch the interview with retirement specialist Todd Krantz.

Content:
Insurance and retirement can seem an unlikely fit, largely because insurance is traditionally seen as something that kicks in when something ends: a life due to an illness; a house destroyed by fire; a car suddenly stolen. But with a fixed index annuity – an insurance carrier product – the payoff represents a continuation: namely, the life of the insured, and the owner’s conscious decision to forego some retirement risk in exchange for guaranteed lifetime income.

According to recent annuity sales statistics from the Insured Retirement Institute, more and more consumers are adopting a similar attitude: that their retirement income – often among their highest valued assets - should be insured just as they’ve done for their house, health or auto. In fact, the IRI cites a year-over-year 28% sales gain in fixed index annuities to $15.2 billion for the quarter ended June 30, 2016.

Additional attitudes that guide the purchase of a fixed index annuity are a near zero-tolerance for stock market volatility; a desire to cover basic lifelong expenses like food, healthcare and shelter with predictable income sources; and fears about the impacts on nest eggs, perhaps even depletion, by extended longevity.

While guaranteed lifetime income is a common feature among fixed income annuities, other attributes can vary among carriers. These include:

Carriers’ quality rating: Carriers rated A to AAA may be an indicator of the carrier’s ability to fulfill their contract. Anything less may represent risk. The summaries of the carrier’s financials are generally available through your financial adviser and may need to be reviewed by your accountant.

Disclosures: While all carriers must fully disclose costs and rewards, the fact remains that some representatives are better than others, pointing to the need for comprehensive review before any purchase decision is made, or money is paid.