Buy one annuity per year for retirement ?

[HealthGuy]

What would it look like supplementing a large amount of retirement income by buying one fixed indexed annuity per year as someone progresses towards retirement? Would this make any sense for a late 40s person in age to say drop $20k or more each year into a new annuity to give you almost a "guaranteed pension" cushion in retirement and to guard against sequence of returns nearing retirement? Do any of you have any clients who have employed this strategy and what would this look like every year buying an annuity? Thanks!

 

[Newby]

What would it look like supplementing a large amount of retirement income by buying one fixed indexed annuity per year as someone progresses towards retirement? Would this make any sense for a late 40s person in age to say drop $20k or more each year into a new annuity to give you almost a "guaranteed pension" cushion in retirement and to guard against sequence of returns nearing retirement? Do any of you have any clients who have employed this strategy and what would this look like every year buying an annuity? Thanks!

I've done it myself. It's been great as far as I'm concerned.
Look at it this way if you worked for someone else and they offered a pension you would think it's a great thing. But when you work for yourself you can create your own pension but most fail to do it.

 

[Tahoe Ray]

What would it look like supplementing a large amount of retirement income by buying one fixed indexed annuity per year as someone progresses towards retirement? Would this make any sense for a late 40s person in age to say drop $20k or more each year into a new annuity to give you almost a "guaranteed pension" cushion in retirement and to guard against sequence of returns nearing retirement? Do any of you have any clients who have employed this strategy and what would this look like every year buying an annuity? Thanks!

It's a great idea for an agent to do this for themselves.

You're probably not going to get responses based on clients employing the strategy since it is a terrible idea to market.

 

[fed up]

Only drawback is that you can't touch the money for years without a penalty but if you can find 5 or 7 year annuities you have lessened the time wait

 

[Allen Trent]

aren't there any quality FIA products that are flexible premiums instead of having to buy separate contracts that would cause some issues for a client or beneficiaries to manage? 1 or 2 decent contracts that allow added deposits would seem much better than 10-15 confusing products that could have all kinds of inadvertent missteps in terms of beneficiary designations, etc.

I know there have been many fixed annuities & VA over the years that allow ongoing deposits that can track the surrender charges with the date of each contribution

just wondering what the point of having so many separate policies would be

 

[CrustyVet]

aren't there any quality FIA products that are flexible premiums instead of having to buy separate contracts that would cause some issues for a client or beneficiaries to manage? 1 or 2 decent contracts that allow added deposits would seem much better than 10-15 confusing products that could have all kinds of inadvertent missteps in terms of beneficiary designations, etc.

I know there have been many fixed annuities & VA over the years that allow ongoing deposits that can track the surrender charges with the date of each contribution

just wondering what the point of having so many separate policies would be

I don't know about having 10 - 15 contracts but having several contracts is a good thing. The flexibility creates opportunities. A few could have income riders that turn on at different dates. A couple others could be growth oriented and be a source of supplemental income where needed, or just a source of safe savings. Multiple contracts also allows flexibility with beneficiaries. There may be a charity or a special needs you want to leave a little to. Having a small contract dedicated to that purpose can be a good thing. You could have a combination of flex premium and single premium contracts. Again, more flexibility is better than less flexibility.

 

[Allen Trent]

I don't know about having 10 - 15 contracts but having several contracts is a good thing. The flexibility creates opportunities. A few could have income riders that turn on at different dates. A couple others could be growth oriented and be a source of supplemental income where needed, or just a source of safe savings. Multiple contracts also allows flexibility with beneficiaries. There may be a charity or a special needs you want to leave a little to. Having a small contract dedicated to that purpose can be a good thing. You could have a combination of flex premium and single premium contracts. Again, more flexibility is better than less flexibility.

Agree, but the OP asked if it made sense for someone in their 40s to drop 20k per year into a new annuity each year. That would turn into 10 or 15 different contracts. Hopefully any good compliance department would keep that from happening.

Lastly, while I agree it allows flexibility in bene designations, that can also spell disaster to keep up to date & consistent with overall estate plan as each annuity has different interest growth or returns, RMDs, distributions, forced withdrawals for nursing home costs. This can result in some heirs receiving substantially different unintended amounts. Again, I think having a few different ones is good, but 10-15 of the same type(ira, Roth, NQ,etc) seems to be a problem waiting to happen.

 

[scagnt83]

I think it just depends. There are pros and cons. Like many things in the planning arena, a lot of it just comes down to what the client prefers.

If a person accumulated 10-15 annuities over the course of their working years, they could always consolidate as they age out of surrender. But it also makes for a whole lot to keep track of for both agent and client during those working years.

A flex-premium annuity is a great starting point for this strategy imo. It locks in one product/rate already, and lets you shop the market for a better option that year if one exists.

@Allen Trent there are fewer and fewer flex premium annuities on the market. Even less if you want a competitive rate!

Great American has 2 solid options: American Legend III & American Legend 7. (both 7 year products)

Other carriers with flex-premium products are:
American Equity
Midland
NA
Pac Life
F&G
Delaware Life
Jackson National
National Western (crap carrier that uses teaser rates & takes 45 days to send your money back to you)

Only a few of the products from those carriers would be considered "competitive" (imo) in today's market.

 

[scagnt83]

And @HealthGuy , as an alternative, I would highly suggest laddering AAA bonds or just investing in bond funds based on your current age. (assuming you already have funds at work in the market, if not, investing in dividend paying stocks along with bonds would be prudent)

(not investment advice!... more barstool advice... lol)