In the ongoing hunt for stable, pension-like retirement income sources, deferred income annuities (or DIAs) are heating up as an increasing number of insurance carriers have begun to offer the products.
Unfortunately, many clients continue to view DIAs only as a type of longevity insurance that can protect against the risk of outliving traditional retirement savings. As the market for these products expands, however, this common view has become more and more inaccurate—causing many clients to miss out on a product that can function as a powerful component in any retirement income portfolio.
Keeping current with respect to the flexible nature of these products can mean the difference between creating a well rounded retirement income portfolio or missing the opportunity to purchase when the time is right.
DIAs: Common Misconceptions
In many cases, when clients hear about deferred income annuities, they think of an annuity product that requires an extended deferral period in order to begin payouts when the client reaches old age. While this type of product can be extremely useful in protecting the client against the risk of outliving his or her assets, many clients feel that the investment will be wasted if they do not live through the extended deferral period.
In reality, however, this form of longevity insurance is only one type of deferred income annuity, and many DIAs allow the client to choose to start receiving income within as little as 13 months—or as long as 45 years—after purchasing the contract. Clearing up this common misperception can vastly expand the use of deferred income annuities among clients—especially when they discover the flexibility that the DIA product can offer.
Finding Flexibility With DIAs
While clients have the option of choosing an annuity starting date that begins relatively quickly or far into the future with DIAs, these products often will allow the client to change the annuity starting date that he or she originally chooses. This gives the client flexibility, as circumstances can change over a longer deferral period.