How to Take the Confusion Out of Annuity Splitting - and the Fear Out of 65

So why not avoid the confusion? Instead of putting a third of your client’s money into a single premium immediate annuity (SPIA) and two-thirds into stocks or a variable annuity, put half into each.

It’s not just a matter of making the math easier to digest. We’re talking about clients who, when push comes to shove, tend to opt for more guaranteed income rather than potential growth. For that reason, 50/50 just meets their needs better.

Build in more recovery time

When you’re looking for the right SPIA for your clients, consider one that has a 10-year period certain payout rather than the usual six-year payout. We’ve had two major recessions in the past 10 years; six years is simply no longer enough time to achieve the growth needed for the split to work. You also can expect a higher commission for a 10-year SPIA.

Here are a few other things to look for in an SPIA to help dispel your clients’ fear of 65.

• “Pay raise.” Retirement-age clients are always concerned with keeping up with inflation. Find a 10-year SPIA that gives them a “pay raise,” or a payout step-up, in the sixth year.
• Advance access. Your client is probably also thinking about cash liquidity in case something unexpected happens. Some carriers allow clients to withdraw up to 30 percent of their contract’s future value as often as every 36 months. Find an SPIA that does this.
• Deferred payouts. And finally, look for an SPIA that features deferred payouts if your client plans to retire, but not quite yet.

How hard is it to find all these features wrapped up in one package? Not as hard as you’d think. Introduce it — and a true annuity split — to your clients, and you’ll be delivering a clear message: Don’t fear 65.

Laura Hahn is managing director of the Annuity Center for The Marketing Alliance (TMA). She can be reached at 314-275-8713 or [email protected].