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Selling Equity Indexed Annuities To Seniors

Published on October 24, 2008 in equity indexed annuities by Bob Richards

Seniors and pre-retirees generally form a major percentage of people who buy annuities. This is so because people start thinking about earning a constant income post retirement at this age. On the other hand, at this seniority, most people also have enough money to invest in annuities and other financial products. There is a huge debate among agent and financial circles regarding the ethics of selling equity indexed annuities to seniors.

Many insurance agents themselves feel that selling indexed annuities with long lock-in periods and low caps to seniors is a little unethical. The high commissions that you get with equity indexed annuities further add to this belief. Your decision to sell indexed annuities to seniors is all your own, but you also need to know and make your prospects aware about some of the main benefits of indexed annuities. While fixed annuities are a good product any day, equity indexed annuities could be the right choice for seniors who have concerns related to:

Inflation:  Investing in equities can go a long way in offsetting the effects of inflation. By advising seniors to invest in indexed annuities with asset allocation portfolios matched with their risk bearing capabilities, you let them put their assets in equities without their having to get directly involved with trading them.  However, it is important to tell your prospects about the amount of risk involved without exaggerating the results that could be expected.

Taxation: Most clients who have enough money to invest are out looking for options to save on tax. By investing in tax deferred index annuities, your client might be able to save a lot of money that would otherwise have gone as tax on mutual funds, stocks, deposits and savings. In spite of the fact that processing fees and charges related with equity indexed annuities are high and that the risk involved is much larger than that with other financial products, equity indexed annuities can provide an ultimate yield that will be much larger than other fixed and variable annuities. Along with telling your leads about the tax benefits that they can get with a particular indexed annuity, you should also make it a point to inform them about the conditions where taxes are applicable like withdrawals and income generation from annuity assets.

High Profits: Since the stock markets are going through a very lean phase right now, it might be the perfect time to invest in a stock index annuity because in the long run, the prices of stocks are bound to go up. Index annuity buyers who are ready to wait for at least five to ten years can expect unprecedented profits by investing in equity indexed annuities when they are at an all time low.

Outliving Annuity Payments: Many equity indexed annuities nowadays come with a guaranteed living withdrawal benefit clause. This can be a very lucrative option for seniors who want to invest in an annuity that lasts throughout their life time, no matter how long it is. You can sell such index annuities to seniors who worry about outliving their annuities.

Before you sell the annuity, ask yourself this.  If this same annuity were sold to your mother, would you be happy she made the investment?

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5 thoughts on “Selling Equity Indexed Annuities To Seniors

  1. Financegal says:

    Very good post. I think that equity indexed annuities could be a good idea for a lot of senior citizens; the worst thing that happens to a lot of seniors is that their annuities don't provide them enough money to comfortably live on in retirement. This would avoid the taxation and inflation problems. As long as you're honest about the risk, I think there's no problem with it. However, these products would probably better suit a 62 year old as opposed to a 95 year old, because they have more time for the stock market to go up again and make this a good investment.

    Financegals last blog post..First Immediate Annuity from Securian

  2. Annuities are really a great way to save for retirement, especially the tax savings that most people just dont realize, but for some reason they just seem to lag behind in popularity. When done correctly they beat any stocks, bonds or mutual funds hands down.

  3. Hank m says:

    Hey there great post here and regarding what you said about:
    "High Profits: Since the stock markets are going through a very lean phase right now, it might be the perfect time to invest in a stock index annuity because in the long run, the prices of stocks are bound to go up."
    sure would be but always expect it to drop before it gets higher dont sell to early thinking you will loose the money just ride it out and you wont be disappointed
    as for what financegal was saying i would totally agree in the fact that if your already 95 no point but its always good to think about who you may be passing it down to!
    as for retirement investing i would say o yea anything done correctly will have a great outcome

  4. Derek Simons says:

    I could not agree more with what you said about "Inflation: Investing in equities can go a long way in offsetting the effects of inflation. By advising seniors to invest in indexed annuities with asset allocation portfolios matched with their risk bearing capabilities, you let them put their assets in equities without their having to get directly involved with trading them. However, it is important to tell your prospects about the amount of risk involved without exaggerating the results that could be expected."

  5. Lara Williams says:

    "...it is important to tell your prospects about the amount of risk involved without exaggerating the results that could be expected." - You are right! It is very important to tell prospects about the risk and elaborating on the results of such risk involved.

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