annuity.suitability

Suitability is a technical term used in the annuity world that simply means, does it make sense for your client?

Based on their current situation, their current and future financial needs, does what your showing make reasonable sense?

For the most part, when a client puts funds into an annuity, this is NOT money they will need tomorrow. They are telling you and the insurance company, yes, they would like access to their money every year but that most of the money can sit there most the time.

If your client wants to take all of the money and use it for a down payment on a house next year, an annuity is not right for them.

Annuities are designed for growth without any risk of loss, but in exchange, the client is agreeing that they will be limited to take out 5% or 10% per year, not the entire account value.

That being said, if someone has $700,000 in an account and they want their money to be liquid, simply ask – have you ever needed to take out $700,000 all at once? Even $200,000 all at once? Most people have not. But it is important to understand their situation.

Annuity companies will also not take every penny someone has. Because again, most of that money is meant to sit there, most of the time. If someone only has $20,000, it probably doesn’t make sense to put all their money into an annuity because there may be a situation that comes up where they need $8,000.

Suitability is a process where you look at their financial picutre and they can reallocate some of their money to an annuity to accomplish their goals but still have money for their every day living.

An annuity should bring peace of mind to our clients to know they will never have to worry about market losses or worry about running out of money. It should not be a concern that they don’t have access to enough of it. Annuities are not meant for all of their money, but it can make sense to have it as part of the diversification of their retirement assets.

Who Are Annuities Designed For?

Safety: How do you grow your retirement assets without risk of losing money?
Annuities allow you to participate in the market without the risk of losing any money. It locks in your principal and interest earned every year.

Growth: You can participate in different indexes and with different strategies without losing money in the volatility of the stock market.
Annuities use participate rates, caps, and spreads that can be adjusted every year. There is no "wrong" decision that you can make because you cannot predict what the market will do. However, you can rest easy at night knowing whatever decision you have made, you will never lose money.

Income: What if you run out of money in your golden years?
The fear or running out of money has replaced the fear of dying early. People are living longer and do not want to risk running out of money. Fewer and fewer people have pensions that are guaranteeing income, and annuities are literally a vehicle to create a pension or another lifetime income stream.