Anyone who has ever tiled a shower knows how useful those little spacers are. They serve as placeholders, securing a spot for the grout that will hold the tiles in place.
Certain insurance products can be used similarly.
Consider: Facing the future can be a daunting prospect, especially for seniors who are taking stock of their retirement situation. While these clients may not be ready to embrace an all-encompassing plan for their future, they may be open to using placeholders to allow them an incremental implementation of a strategy.
Industry experts have suggested the possibility of using annuities as a placeholder for retirement income. It is a topic that deserves further discussion. Absent a pension, a retiree must find a way to create income.
For the lucky few, this may mean tapping into inexhaustible wealth. For the rest of U.S. retirees, there’s a bit more stretching involved. Social Security benefits may provide a small floor income. After that, however, what’s the right plan?
One solution is to buy a large immediate annuity. Many people, however, are uncomfortable giving complete asset control to an insurance company in return for an income stream. Discomfort aside, is buying one income stream the best answer, anyway? Wouldn’t it be preferable to achieve a reasonable income over the long haul while simultaneously maintaining control over a portion of assets?
That’s where deferred annuities become an income placeholder for a senior. By laddering annuity products, eras of income can be created while permitting control of the remaining deferred assets and allowing maximum growth potential.
The idea is to set aside several chunks of retirement assets that don’t need to be used as income for long periods of time. Those funds can then be invested in longer-term, higher-yielding vehicles until they are needed. The longest-term portion might even be put to work in an indexed annuity or variable annuity with return of premium guarantee.