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7 Ways Annuities Can Solve Your Clients’ Financial Problems

Hope is the magic ingredient in motivating yourself and others, or so said W.C. Stone, the founder of Combined Insurance Co. and one of the original positive attitude leaders.

Regardless of your feelings about positive attitude thinking, sometimes I’m positive something is crappy and sometimes I think everything is great. Funny how that works!

One subject I feel positive about is annuity sales, and Wink Inc.’s most recent sales results back me up.

Wink reported that traditional fixed annuity sales in the second quarter were $875 million — up 19.9 percent from the first quarter, although down 12.5 percent from the same period last year. (Hang on, that may not actually be bad.)

The report also shows that multiyear guaranteed annuities were up 23.4 percent ($10 billion) from the first quarter and up 27.2 percent from the same time last year.

Overall, the Wink report showed indexed annuity sales were $17.3 billion in the second quarter this year (up 22 percent from the first quarter), while showing an increase of 18.4 percent over last year.

So are you in the annuity market?


I know — the annuity market can seem scary. You think you must be an expert, you may not be sure where these products fit, and you don’t want to lose traction from what you are already successful at. Right?

Well, let’s see if we can identify how you can use some different concepts to identify sales opportunities within the activities you are already engaged in while helping your clients in the process. After all, that’s what it’s about, isn’t it?

1. Split Annuities

Many retirees may need to draw enough income to live comfortably, but they must exercise caution not to deplete their nest egg. In many cases, the split annuity may hold the answer to their concern.

The split annuity is intended to provide immediate income while simultaneously regrowing the principal to — or close to — its original amount.

This works by using both an immediate and a deferred annuity.

Enough premium is placed in the deferred annuity to grow back to the original total investment (or close to it). Meanwhile, the remaining premium is placed into an immediate annuity in an amount that will provide the needed income for a specified period.

After the specified number of years, the deferred annuity grows close to the original amount invested and is completely out of the surrender charge period.

The client now has several options, none of which will result in surrender penalties.

The deferred annuity may be annuitized and provide income payments, all or part of the annuity may be surrendered and placed into another instrument, or the entire split annuity process may be started over again.

2. Bonus Annuities

Bonus annuities pay an interest bonus during the first year, and a set base rate for subsequent years. Many bonus annuities will pay a bonus for additional money added to the annuity for the entire term of the annuity.

For example, the Allianz 222 Annuity offers the opportunity to earn a bonus during a client’s accumulation period, and after they begin receiving their income. The insured’s principle is protected as expected from market downturns, and the insured has the potential interest based on: allocation options they choose, tax-deferral and death benefits. (I’m not promoting their specific product, or any carrier’s, just illustrating how this concept is available.)

Bonus annuities have a higher average yield due to the high first-year credit. These annuities are especially useful when it is necessary to cover surrender charges from other plans.

3.Multiyear Guarantee Annuities

This is another type of fixed annuity that has some of the same features of certificates of deposit and bonds in that they guarantee a rate of interest for the entire annuity period, or for a set number of years as stated in the contract.

The surrender charge period is usually the same as the interest guarantee period.

Some multiyear guarantee annuities will allow up to a 15 percent withdrawal after the first year without penalty, and most will allow interest-only withdrawals after the first year.

Wink showed sales of these annuities were up 23.4 percent in the second quarter of 2018 from the previous quarter.

4. Tax-sheltered Annuities

Tax-sheltered annuities are special annuities that are qualified.

These annuities are only for persons who are employed by tax-exempt organizations, such as educational institutions, tax-exempt hospitals and other charitable organizations.

TSAs are qualified in that they are funded with pretax dollars and fall under Section 403(b) of the IRS code. Employers do not match funds, and the premiums for the annuities are withheld from the worker’s paycheck. Payroll deduction is the extent of the employer’s involvement. There is a maximum contribution set by the IRS and it varies from year to year.

As with all qualified accounts, the funds accumulate tax-deferred. Taxes are paid on the full income when it is withdrawn, whether in a lump sum or as installment payments.

I cut my teeth on these products back in 1977, just after TSAs came into existence. I have a plaque in my office recognizing me as the top TSA producer in the Southern District, 1977, for John Hancock (a little nostalgia for you).

5. Income Protection

Clients who don’t want to worry about juggling assets to generate income and who need a low-risk source of income can invest in a single-payment immediate annuity to cover fixed monthly expenses.

Because funds for living expenses are guaranteed, clients can invest other assets more aggressively.

6. Fund A Divorce Decree With A SPIA

Clients can purchase a SPIA to fund the benefit payments spelled out in their divorce decree.

With a SPIA, a divorced client can pay child support or make benefit payments to an ex-spouse. The balance is then paid to the client to pay taxes.

In this way, court-ordered payments are always made on time, fulfilling the requirements of the divorce decree. The ex-spouse is assured of receiving those payments.

7. Fund The Purchase Of A Business

To fund a business purchase, a client can purchase a SPIA with a benefit payment that meets the seller’s requirement. The annuity is owned by the client, with payments made to the business’s seller.

The seller secures the full price for the business. The buyer puts out less money for the purchase, and the seller defers capital gains tax.

After the business is paid for, the owner can use the benefit payments for other obligations or to fund retirement.

As you can see, annuities provide numerous ways for clients to solve everyday financial problems they face, and to address lifestyle issues.

Here’s my tip for you: Start asking questions that encourage your clients to tell a story — about the challenges of saving for retirement, how outliving their income has affected a family member, or about financial problems they would like to avoid.

Remember, great stories are about people, not things. And what people are using annuities for is a great story!






Lloyd Lofton is managing partner of 7 Figure Sales Tools, Marietta, Ga. Lloyd may be contacted at [email protected] [email protected].

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