Recent media coverage has raised questions about annuities and their role in Americans’ retirement plans. Those conversations are important, but they should begin with a clear understanding of what annuities are designed to do: help consumers manage risk and create greater financial security in retirement.
Americans approaching retirement face a challenge that previous generations did not always have to consider to the same degree: Their retirement may last 20, 30 or even 40 years. An annuity can provide greater predictability and, depending on the product, income they cannot outlive.
Annuities are not one-size-fits-all products nor are they appropriate for every consumer. Different types of annuities offer different features, guarantees, costs and tradeoffs. That is why working with a knowledgeable financial professional matters.
Consumers benefit from important protections governing annuity sales; protections NAIFA helped put in place. Working with ACLI and grassroots advocates across the country, NAIFA was a driving force behind state adoption of the NAIC Best Interest Annuity Model, which requires financial professionals to act in a consumer’s best interest when recommending an annuity. NAIFA worked with policymakers and regulators to advance standards that strengthen consumer protections while preserving access to professional financial guidance. Today, consumers in all 50 states are protected by a best-interest framework for annuity transactions.
Financial professionals can help consumers understand both the benefits and limitations of any financial product they purchase. They can help a client look beyond any single product or market headline and determine how an annuity may (or may not) fit within a broader financial strategy based on that individual’s needs, goals and tolerance for risk.
As NAIFA President Christopher Gandy, LACP, wrote earlier this year, annuities can serve as a stabilizing element within a broader financial strategy by helping address risks including longevity, market volatility and the need for reliable retirement income. Read his column, “Annuities can become a portfolio ‘stabilizer,’” published recently in InsuranceNewsNet.