Bust these 5 myths for more FIA sales
People who have enough money to cover their short-term financial obligations are likelier to save for longer-term goals like retirement, which makes sense. But education also plays a role. Myths and misconceptions can also get in the way of planning for a secure retirement, particularly when considering an annuity. Americans are largely confused about how to turn workplace savings into lifetime guaranteed income by purchasing fixed indexed annuities, for example.
Here are five common myths you can bust for your clients. Armed with the facts, they will be more prepared to make a confident and informed decision.
Myth 1 – Annuities are full of hidden charges.
Like mutual funds or any managed money solution, the indices used in index interest crediting strategies may include management fees. Insurance companies employ caps, participation rates and spreads to limit the interest credited in exchange for protection from stock market risk or losses. There may also be a charge for income or other riders.
Financial professionals and the insurance companies must disclose any and all fees associated with annuities. They must clearly explain withdrawal charges, which may be incurred if the client surrenders the contract during the withdrawal charge period or withdraws money beyond the penalty free amount allowed in the contract.
Myth 2 – Annuities are not tax efficient.
As long-term, tax-deferred products, annuities may be a valuable solution for those looking to grow their retirement savings. Annuity earnings grow on a tax-deferred basis until a client begins taking withdrawals or surrenders the annuity.* Over time, clients will have the potential to build more retirement savings than they would have been able to if their earnings been taxed as income. Keep in mind, however, that there is no additional tax benefit associated with funding an annuity from a tax-qualified source like a 401(k) plan.
Myth 3 – Annuities can’t keep up with inflation.
Income riders frequently offer payout options that are indexed to inflation, which may help clients keep pace with the rising cost of goods and services.
Myth 4 – Annuities are not liquid.
In most cases, deferred annuities allow withdrawals up to a specified percentage of the contract’s accumulated value each year during the withdrawal charge period without any charges. Once the withdrawal charge period has ended, funds may be withdrawn without any charges. Keep in mind, however, that fixed indexed annuities are designed to meet the need for long-term retirement savings and income.
Myth 5 – Fixed indexed annuities are investments.
Fixed indexed annuities are insurance products that are designed to help clients manage certain financial risks associated with retirement such as volatile markets, interest rates and longevity. They do not directly participate in any stock or equity investments.
This information is brought to you by Athene — where innovative annuity solutions are powered by unconventional thinking.
* Withdrawals and surrender may be subject to federal and state income tax and, except under certain circumstances, will be subject to an IRS penalty if taken prior to age 59½.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.