With the Market’s Doing So Well, Do We Still Need Annuity Guarantees?

This is the first in a series of informative pieces that addresses how our annuities serve us. Of course please don’t hesitate to let me know your thoughts and questions.

When markets are volatile, annuity guarantees can provide confidence and reduce temptations of our making emotional decisions that we may later regret.

  • By contrast, when markets have performed well, it is only natural to wonder whether those guarantees are still worth the additional cost.
  • Particularly on the heels of our unprecedented post-election market rally, some may also be wondering how best to protect our recent gains should we experience a downturn.

As described in more detail in the attached, variable annuities with guaranteed minimum withdrawal benefit (GMWB) riders not only provide a minimum guaranteed payment for the rest of your life, but also the potential to increase that payment if your account value experiences market gains.

  • GMWBs are designed to provide guaranteed retirement income with the potential for market growth.
  • You may start, stop, or change your withdrawal amount at any time, but withdrawing more than the annual guaranteed withdrawal amount may adversely affect your benefits.
  • Your contract value fluctuates with market conditions.
  • Your account earnings can grow tax deferred, but withdrawing earnings before age 591/2 may result in penalties.

GMWBs

 

 

 

 

 

 

* The withdrawal benefit base does not have a cash value, but is used to determine the investor’s annual lifetime income payment. Only the investor’s account value has a cash value.  See attached for the complete discussion.

You win either way: Perhaps one of the greatest risks retirees face is outliving their retirement savings. Variable annuities with GMWBs help address this concern by guaranteeing a minimum income payment for life, while allowing your account value to potentially grow. Your income is protected from a down market, but can still benefit from an up market — a win-win situation. No other financial product offers this unique combination of benefits.

  • If positive market performance causes your account value to increase, you may lock in this gain to increase your minimum payments for life.
  • If poor market performance causes your account value to decrease, even to $0, your minimum payments are still guaranteed for life.

I trust you will find this piece is helpful.  Again, please don’t hesitate to let me know if any thoughts or questions.

This information is not considered a recommendation to buy or sell any investment or insurance and is being provided for information purposes only and is not a complete description, nor is it a recommendation. We strongly recommend an advanced tax and estate planning expert be contacted for further information since Wells Fargo Advisors Financial Network LLC (WFAFN) does not provide tax or legal advice. Any opinions are those of Mitchell Kauffman and not necessarily those of WFAFN. The information has been obtained from sources considered to be reliable, but Wells Fargo Advisors Financial Network does not guarantee that the foregoing material is accurate or complete.  Prior to making a financial decision, please consult with your financial advisor about your individual situation.  Investment products and services are offered through Wells Fargo Advisors Financial Network LLC (WFAFN)/Member SIPC. Kauffman Wealth Management is a separate entity from WFAFN.