3-minute article

Where annuities fit into modern financial strategies for a better retirement

In the past, it was possible to enter retirement with little concern about money, because a company pension, Social Security benefit and personal savings was often enough to carry someone through retirement. Today, that scenario has drastically changed. Only 7 percent of retirees use all these income sources to ensure their retirement security. “With defined benefit pensions no longer available to most, and Social Security benefits never intended to be the sole source of retirement income, clients need a new strategy to fit the needs and challenges of today’s world,” states Grant Kvalheim, President of Athene. “Fixed indexed annuities (FIAs) and registered index-linked annuities (RILAs) give financial professionals new options to help clients create the income needed for a potentially lengthy retirement.”

Painting an accurate annuity picture
Some consumers may have misconceptions about annuities or do not understand how these products work and the benefits they provide. You may have heard from your clients that they think annuities are too expensive or complex and are hesitant to explore them as an option for retirement planning. However, today’s annuities offer features and flexibility that didn’t previously exist and can play an important role in meeting the diverse and changing needs of today’s retirement savers.

Both FIAs and RILAs provide a level of protection from market losses and can be used as a vehicles for tax-deferred accumulation.* As you begin the retirement planning conversation, you can help dispel any myths your clients may have about annuities.  

Meeting the diverse needs of retirees
Annuities have been around for centuries, and while much has changed through the years, the purpose of the annuity remains the same: to help people address the challenge of outliving their money. “Supplementing a retirement portfolio with an FIA or RILA can help your clients pursue growth opportunities, while adding a measure of protection from loss if the markets go down,” shares Kvalheim. Annuities can help build a more confident retirement by bringing three key benefits to an income strategy:

  • Growth potential: interest crediting based in part on the upward movement of a market index provides opportunities for accumulation even in a low rate environment
  • Flexibility: Tools that provide liquidity for unplanned needs.
  • Stability:  Reduce the risk of losing principal due to market downturns.

FIAs allow your clients to pursue growth potential with guaranteed protection from market loss, where principal is completely protected from loss due to market downturns. RILAs offer greater growth potential through a level of exposure to market risk. A RILA may be a suitable match for someone who is comfortable with financial risk, but wants a portion of their retirement savings to have some protection from market volatility. 

Creating a customized retirement plan
Kvalheim explains, “One common theme in retirement strategies is the need for flexibility, because not only is life unpredictable, but a person’s needs and goals can change as they age. Many FIAs and RILAs include features that can bring clients additional confidence, like free withdrawal options, terminal illness and confinement waivers and the ability to create a legacy through a death benefit.” They may also provide the option of a guaranteed retirement “paycheck,” where a client receives monthly income for the rest of their lives.

The possibility of longevity, rising health care costs and inflation are just a few of the risks retirees face in the years ahead. Modern annuity designs may help provide a solution for these challenges and offer you and your clients a useful tool for retirement planning. Since the responsibility for a financially secure retirement falls mainly on the retiree, the need for an effective retirement income strategy is more important than ever before. Annuities can be an important part of a solution that helps your clients retire better.

This information is brought to you by Athene — where innovative annuity solutions are powered by unconventional thinking.


*Under current tax law, the Internal Revenue Code already provides tax deferral to qualified money, so there is no additional tax benefit obtained by funding a qualified contract, such as an IRA, with an annuity; consider the other benefits provided by an annuity, such as lifetime income and a Death Benefit.