The oldest baby boomers are approaching age 70. As this segment of the demographic — which spans the two decades from 1946 to 1964[1] — moves deeper into their post-retirement years, many are starting to think about how to pass on their wealth. And they have a lot of wealth to transfer. A study from Accenture found baby boomers’ net worth equals nearly $7 trillion.[2]

Although clients might have initially chosen to invest in an annuity to accumulate retirement savings, a fixed annuity also can be used as a wealth transfer strategy.

Wealth transfer with a fixed annuity
Fixed annuities can be used to transfer money from a purchaser’s estate directly to select beneficiaries. This allows purchasers to direct assets to loved ones as they see fit. By selecting the amount and frequency of payments, this planning helps ensure their beneficiaries are set up for success.

Clients might not be aware that death benefits payable to their heirs, especially in large sums, could actually be a burden. The taxes associated with the gift could place beneficiaries in a different tax bracket and/or eat up a significant portion of an inheritance. Fixed annuity payments can help spread out that impact.

Checking in on existing clients
For existing clients, your next check-in might be an opportune time to bring up this concept. Here are a few approaches to take: 

  • Have you thought about where this money will go after your death? When checking in with clients, especially those who are well past retirement, inform them that they can use their current annuity to disburse their assets after death. To do so, have them consider who they would like their money to go to, and how they’d like this payment to be structured.
  • Are your beneficiaries properly listed? We’ve all heard horror stories about payments going to the wrong people because of an out-of-date beneficiary designation. Ask clients whether their beneficiary designations have changed in light of divorce, remarriage or death.
  • Are your beneficiaries good with money? Many fixed annuities have restrictive endorsement options that give the purchaser “control from the grave.” This takes the decision-making out of the hands of beneficiaries, who might not be ready for the responsibility or are bad at money management.
  • Here’s how this worked for another client. Bring up a scenario that could be similar to that of your client.

For example, one of the advisors I work with recently assisted a grandmother who wanted to gift money to her grandchildren. The advisor wrote a restricted single premium immediate annuity (SPIA) on an immediate annuity, which created a five-year income stream instead of one lump-sum payment. The grandmother was interested in this approach because she was worried her grandchildren would spend the entire payment if they received it at once. Not only did this spread out the tax burden, she liked the idea that her grandchildren would receive a monthly check from her after she was gone.

As an advisor, you work to craft a financial plan that reflects your client’s financial goals. A fixed annuity can grow with your clients from the retirement accumulation stage to the wealth disbursement stage.


[1]U.S. Census Bureau. The Baby Boom Cohort in the United States: 2012 to 2060. http://www.census.gov/prod/2014pubs/p25-1141.pdf. Published May 2014. Accessed November 11, 2014. 

[2]The “Greater” Wealth Transfer, Capitalizing on the Intergenerational Shift in Wealth. Accenture, 2012.