It
seems much longer than
8 years ago when
income riders within Fixed Indexed Annuities (FIAs)
provided guarantees never offered. Historical income value roll up
rates that were as high as 8% are now being outperformed by uncapped
strategies. To me, its amazing to see how the evolution of income
planning has redefined itself, especially in under a decade. Today,
more financial professionals
are redirecting retirement funds into FIAs that provide increasing
income streams, as well as uncapped strategies, for life. Depending on when you plan to retire will determine which increasing
income strategy may be best equipped to meet your needs. This is why
it is important to work with a professional who
specialization
lies within income planning solutions.
The
days of FIA annual point to point strategies that can only provide a
return of 3.0% are well behind us, and good riddance. Through many
of today's specialized indexed strategies, policy owners within a FIA
can now participate in 90% + of
the market upside
(within
a predetermined indexed strategy)
with absolutely zero downside. This means that you can never lose
your principle or earned interest moving forward, regardless of how
the market performs. As this past recession has shown, principle
protection in down markets is key to making your retirement a
reality. These recent uncapped strategies are causing more financial
professionals
to redirect client
funds into guarantees absent in a turbulent market. Depending
on what your individual circumstances (retirement time-line) are will
depend on which strategy may best suit your needs.
Income
payouts within FIAs can illustrate much higher than ever before. Income Account Values (non cash values) used to determine income
payouts can participate
up to 250% of a selected index return
while in deferral. Additionally, annual income payouts can increase
by up to 150% of the
same selected index. For example, one
particular FIA that has
a 6% annual return (of
a selected index)
would result in an income payout increase of 9%, never
to decrease! Furthermore, each year the selected index increases in value the
income will continue to increase by 150% respectively.
Within a couple of
these strategies I have
seen income payouts potentially double within a 15 year period, while
continuing to increase for life! These are income payouts that have
never been seen before, specifically designed to protect retirees
from absent pensions and a bankrupted social security system.
So
how did this evolution happen? Simple. Over the last several years
analysts
have learned to maximize the upside potential within
specified indexes,
while protecting the profitability of the issuing company. Because
of the extreme market fluctuations we have seen since 2008 (the most
volatility since the Great Depression) statisticians and actuaries
have been able to capitalize on market profit points, passing on the
gains to the policy owner.
Where
the evolution of income planning ends up remains to be seen. I can
tell you from personal experience that today's potential income
payouts and uncapped strategies were never contemplated 8 years ago. FIAs today are replacing fears of inflation and market downturns with
comfort and predictability. Now, finally, retirement can be
planned with a higher quality of life than ever before!
