Zeroing In On A Retirement Income ‘Sweet Spot’
Due to several new product offerings, the “A” word is no longer the anathema to financial advisors and consumers that it once was.
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Whether single premium or multiple premiums, and whether an immediate or deferred start, annuitization is increasingly understood as the feature that provides “longevity insurance.”
It also reduces the amount of assets needed for retirement. That is because the structured conversion of principal into income inherent in annuitization maximizes income and reduces or eliminates the need for contingency funds for adverse investment results.
Included in this category are the “SPIA Family” of products (single premium immediate annuities on a fixed, variable with payout floor, or indeed basis). They provide maximum income and longevity protection, and reduce or remove investment concerns. If used as one piece of a broader retirement income program, an allocation to the income annuity may address the more conservative end of investment allocation, thus permitting more aggressive investing with the balance of the assets. It also reduces the required amount of total assets.
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Deferred-start income annuities can be the perfect complement to a structured withdrawal program. If the annuities are structured to accept premiums early and provide an income at a late age, such as 85, they provide the purest form of longevity insurance at low cost.