What Bank Advisors Need To Know About Annuities

For adventurous bank insurance sales professionals, the first wave of the baby boomer generation heading into retirement is a chance to boost business and help even more clients.

As boomer customers shift from saving income to spending their accumulated assets, bankers need to recognize how their institution’s annuity offerings meet these growing needs. A deferred or an immediate annuity can provide many advantages for these customers.

As the first wave of boomers crashes onto the retirement shore, the number of people looking to convert assets into income will be overwhelming. Bank sales professionals have unique access to many of these individuals because of their established relationships with customers. The time has come for banks and their employees to take a look at the unique advantages of annuities and how they might be able to help provide reliable retirement income for their clientele.

CD or annuity?

A traditional bank customer often purchases a certificate of deposit because it is safe. Certainly, a CD can be an appropriate investment for boomers approaching retirement because it offers a fixed rate of return while protecting assets from market fluctuations. Such low-risk investment options are appropriate for older investors because they have less time to make up for any investment losses. Besides, banks have offered CDs for many years, so bank advisors feel confident selling them to their customers.

At the same time, bank advisors need to help boomer customers consider all their options for investing their maturing CDs. For many boomers who are making the crucial transition from wealth accumulation to wealth distribution, one of the following types of annuity contracts is a far better product.

Deferred annuities. When retirees don’t have to rely on their assets to produce income for current consumption, it’s certainly most advantageous for them to invest their assets.

A fixed deferred annuity is comparable to a CD in that it provides a fixed rate of return. The annuity, however, compounds interest tax-free, which is a significant benefit over CDs. Annuities also offer a liquidity feature, which typically allows for 10% withdrawals from the contract without any penalties. (There may be Internal Revenue Service penalties for withdrawals before the owner reaches age 59 1/2.)

The owner of a deferred annuity can elect to receive the accumulated value in the following ways:

o Lifetime payment: pays a fixed amount for the remainder of the owner’s life.