Deferred Annuity Suitability

Presented by Jim Guynan

The following is a comparison of the three types of annuities in the marketplace today and where they may be applicable. These are good guidelines to keep in mind when prospecting your current client list or visiting with a new prospect who has not purchased an annuity before.

A deferred annuity should be considered as a longer-term investment. If, for example, your objective is to save for retirement and you are already contributing the maximum to an IRA and/or employer-sponsored retirement plan, a deferred annuity might be right for you. But which type of annuity? The answer to that question depends primarily on your investment objectives and risk tolerance.

Fixed interest deferred annuities may be best suited for individuals who:

  • Prefer to rely on fixed rates of return
  • Focus on preservation of assets
  • Want protection from market volatility
  • Prefer to delegate investment decisions and risks to the insurance company
  • Understand that a fixed rate of return may not provide a good hedge against inflation

Variable deferred annuities may be best suited for individuals who:

  • Prefer to invest in equities
  • Want to make their own investment decisions
  • Understand that assets can decline in value
  • Are willing to assume the risk of loss of principal in exchange for the possibility of greater asset growth and a stronger hedge against inflation

Indexed deferred annuities may be best suited for individuals who:

  • Are adverse to risk
  • Understand that a rate of return linked to stock market performance provides the potential for higher returns than fixed interest investments, together with the risk of losing money if the issuing company does not guarantee 100% of the principle and no index-linked interest is credited, or if the indexed annuity is surrendered while a surrender charge is in effect
  • Prefer to delegate investment decisions to others
  • Want less market risk than with a variable annuity

NOTE: Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. All contract guarantees are based on the claims-paying ability of the issuing insurance company. Consult with your licensed financial representative on how specific annuity contracts may work for you in your particular situation. Your licensed financial representative will also provide you with costs and complete details about specific annuity contracts recommended to meet your specific needs and financial objectives.
Before purchasing a variable annuity contract, carefully consider the contract and the underlying funds’ investment objectives, risks, charges and expenses. Both the contract prospectus and the underlying fund prospectuses contain information relating to investment objectives, risks, charges and expenses, as well as other important information. The prospectuses are available from your licensed financial representative or the insurance company. You should read them carefully before purchasing a variable annuity contract.

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