| If your clients' investment goals include guaranteeing income for life, then annuities can be an essential part of their product allocation. An annuity is a long-term savings product that protects one from outliving their assets. By including an annuity in your client's income strategy, you can ensure they have enough income to outpace inflation, to maintain their current lifestyle, and to last their lifetime.
Unlike the potential risks involved with investing in the stock market, an annuity earns a guaranteed rate of return for a specified period of time. Although a new rate is determined at the end of the specified period, the insurance company guarantees that it will pay no less than a declared minimum rate of interest. The interest earned accumulates tax-deferred, allowing your client's money to grow safely and quickly.
Once income payments begin, payments from the interest earned will be taxed. An advantage of tax deferral is that the tax bracket your client is in when they receive annuity income payments may be lower than the one they are in during the accumulation period. They will also be earning interest on the amount they would have paid in taxes during the accumulation period.
When discussing annuities with your clients, consider the following options:
- Single Premium - one payment is made to the insurance company
- Multiple Premium - a series of payments are made to the insurance company. There are 2 kinds available, flexible and scheduled. Flexible premium allows the client to pay as much premium as they want, whenever they want. With scheduled payments, the amount and frequency of payments are determined in the contract.
- Immediate Annuity - Income payments start no later than one year after the premium is paid. Typically this is paid with one payment.
- Deferred Annuity - Income payments start many years later. This allows for an accumulation period, which is the time between the start of premium payments and the start of income payments.
Provide your clients with the safety, stability, and guarantee a fixed annuity can offer. Master Financial can assist you in determining the most suitable annuities for your clients looking to invest for retirement.
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