Each year I am astonished at the increases in healthcare costs for my family, as I am sure many are. I think about ways to increase my income to cover that cost and still show growth to my bottom line. It’s getting increasingly difficult. Healthcare is setting records for annual cost increases and both the young and the old are being impacted. Imagine I’m retired and have a fixed income. I have not taken into account that I may require more care as I age. I have a compounding problem and I have not even taken into account other inflationary threats. Let’s look at ways to address this issue that your older clients may not be thinking about.
When considering this scenario, you may need to discuss this risk in detail with clients, as they may only be looking to maximize their income for today. By helping them understand the potential risk from inflation down the road, you may be able to help them agree to a solution that could include opportunities for increasing income as they age to offset such costs.
Fixed and fixed index annuities can offer guaranteed lifetime income and in some cases guarantees for growth as well as a death benefit for the beneficiary. Some can include increasing income features through either a cost-of-living adjustment to annual annuity payments or through increases to contractual payouts based on performance. As the annuity payments increase over time, the additional income can be used to help offset inflation.
Taking a bucket or laddering approach with annuities may also be an option for some situations. This approach can add additional income and flexibility by identifying separate buckets of money for different time horizons. Those buckets can be positioned for growth until needed as income. Your client can access these buckets at different intervals for additional income sources as they age. Multiple options and products can be used in this solution, so call us for ideas on suitable and appropriate options for the specific cases you’re working on.
While these are just a few ideas, there are many ways to help mitigate this risk. Most importantly, you need to have that conversation with your clients so they understand that a retirement income that sounds good today may not be enough in the future. We have many great resources available on this topic. Please reach out to your marketer at Ann Arbor Annuity Exchange for more assistance. 800.321.3924
Ann Arbor Annuity Exchange
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Income benefit riders may be offered either built-in or for an additional cost.
Any distributions may be subject to ordinary income tax and, if taken prior to age 59 ½, an additional 10% federal tax.
Early withdrawals may result in loss of principal and credited interest due to surrender charges.
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