LIMRA recently reported that total U.S. annuity sales climbed to a record $216.6 billion during the first half of 2024, up 20% from the previous year.1 Not surprisingly, after hearing…
Balancing Risk and Reward in Retirement
An annuity is a long-term, tax-deferred investment issued by an insurance company that can be tailored to help meet retirement planning needs, such as generating a steady income and providing downside protection.
Focused on Income and Protection
Annuities offer numerous strategies to balance risk and reward, tailored to each investor’s evolving needs. Annuities can help retirees and pre-retirees pursue necessary returns to grow retirement assets while minimizing exposure to significant market loss, regardless of market conditions.
Type of Annuities
There are several types of annuities to choose from—all of which offer different levels of upside potential and downside protection.
Fixed Annuities
Fixed annuities preserve retirement assets by providing both a guaranteed annual return and full protection of principal. With a fixed annuity, interest in an investor’s contract grows tax-deferred, and annual tax savings stay in the account to earn interest until money is withdrawn.
Fixed Indexed Annuities (FIAs)
FIAs offer a return based on the change in price of a reference index, such as the S&P 500. They typically also offer a minimum guaranteed interest rate each year and can provide a degree of market upside with full protection against market loss.
Structured Annuities
Structured annuities allow investors to earn interest based on the growth of selected market indices. Investors can balance growth potential and downside protection with the wide range of crediting strategies available. At the end of each crediting period, they can reallocate to a new strategy, adapting to changing financial goals over the life of the annuity.
Variable Annuities
Variable annuities offer tax-efficient growth potential with a choice of investment funds. Investors can move between a more aggressive approach to a more conservative one, without incurring capital gains each year, allowing them to build portfolios aligned with their outlook on the market, risk tolerance, and financial objectives.
Benefits
Annuities offer choice and personalization that may help in forging a path toward financial security in retirement. They can provide:
With annuities, an investor’s contract grows tax-deferred, and annual tax savings stay in the account to earn interest, thereby growing savings faster, until funds are withdrawn.
Flexible in design, there are several types of annuities to choose from—all of which offer different levels of upside potential and downside protection to meet a variety of client needs.
While today’s annuity designs can accomplish many different retirement planning goals, annuities were originally designed with one goal in mind— generating an income for life. Today, annuities remain uniquely positioned to deliver on this goal.
An annuity death benefit ensures a tax-efficient transfer of savings to heirs if the annuitant passes away before the annuitization date, making it a valuable tool for legacy planning.
Key Annuity Considerations
Contract Guarantees
Annuities are not FDIC insured1. All references to guarantees arising under the annuity contract, including optional benefits, are subject to the claims-paying ability of the carrier. With structured and variable annuities, principal is subject to market risk, which may be significant.
Optional Features and Add-Ons
Optional features may be useful to add to an annuity contract, but are also potentially subject to fees, requirements, and other limitations.
Charges and Fees
Early withdrawals or surrender during the surrender charge period may trigger surrender charges, fees, or tax penalties, and may be subject to negative adjustments, which can reduce the account value or the actual withdrawal amount. For this reason, an investor should be prepared and able to hold an annuity through the full length of the surrender charge period. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59 1⁄2, may be subject to an additional 10% federal income tax penalty.
Learn More About Other Asset Classes
Private Equity
Private Equity
Private Credit
Private Credit
Real Assets
Real Assets
Hedge Funds
Hedge Funds
Structured Investments
Structured Investments
Annuities
Annuities
Featured Articles
You have to choose between several indexes and crediting terms lengths, and from an increasing number of products that offer the option of paying a fee for a higher participation…
Earlier in the year, LIMRA reported that both fixed and fixed indexed annuity (FIA) sales hit record levels in 2023. Combined, these two types of annuities totaled $286.2 billion, or…
Securities products and services may be offered by iCapital Markets LLC, a registered broker/dealer, member FINRA and SIPC, and an affiliate of iCapital. Annuities and insurance services provided by iCapital Annuities and Insurance Services LLC, an affiliate of iCapital, Inc. iCapital and iCapital Network are registered trademarks of Institutional Capital Network, Inc. Please see the disclaimer at the end of this document for more information.
IMPORTANT INFORMATION
The material herein has been provided to you for informational purposes only by Institutional Capital Network, Inc. (“iCapital Network”) or one of its affiliates (iCapital Network together with its affiliates, “iCapital”). This material is the property of iCapital and may not be shared without the written permission of iCapital. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of iCapital.
This material is provided for informational purposes only and is not intended as, and may not be relied on in any manner as, legal, tax or investment advice, a recommendation, or as an offer or solicitation to buy or sell any security, financial product or instrument, or otherwise to participate in any particular trading strategy. This material does not intend to address the financial objectives, situation, or specific needs of any individual investor. You should consult your personal accounting, tax and legal advisors to understand the implications of any investment specific to your personal financial situation.
ANNUITIES ARE CONSIDERED COMPLEX PRODUCTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. The information is not intended as investment advice and is not a recommendation about managing or investing retirement savings. Actual annuity contracts may differ materially from the general overview provided. Prior to making any decision with respect to an annuity contract, purchasers must review, as applicable, the offering document, the disclosure document, and the buyer’s guide which contain detailed and additional information about the annuity. Any annuity contract is subject in its entirety is to the terms and conditions imposed by the carrier under the contract. Withdrawals or surrenders may be subject to surrender charges, and/or market value adjustments, which can reduce the owner’s contract value or the actual withdrawal amount received. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 591⁄2, may be subject to an additional 10% federal income tax penalty. Annuities are not FDIC-insured. All references to guarantees arising under an annuity contract are subject to the financial strength and claims-paying ability of the carrier.
iCapital Markets LLC operates a platform that makes available financial products to financial professionals. In operating this platform, iCapital Markets LLC generally earns revenue based on the volume of transactions that take place in these products and would benefit by an increase in sales for these products.
The information contained herein is an opinion only, as of the date indicated, and should not be relied upon as the only important information available. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. The information contained herein is subject to change, incomplete, and may include information and/or data obtained from third party sources that iCapital believes, but does not guarantee, to be accurate. iCapital considers this third-party data reliable, but does not represent that it is accurate, complete and/or up to date, and it should not be relied on as such. iCapital makes no representation as to the accuracy or completeness of this material and accepts no liability for losses arising from the use of the material presented. No representation or warranty is made by iCapital as to the reasonableness or completeness of such forward-looking statements or to any other financial information contained herein.
Securities products and services are offered by iCapital Markets, an SEC-registered broker-dealer, member FINRA and SIPC, and an affiliate of iCapital, Inc. and Institutional Capital Network, Inc. These registrations and memberships in no way imply that the SEC, FINRA, or SIPC have endorsed any of the entities, products, or services discussed herein. Annuities and insurance services are provided by iCapital Annuities and Insurance Services LLC, an affiliate of iCapital, Inc. “iCapital” and “iCapital Network” are registered trademarks of Institutional Capital Network, Inc. Additional information is available upon request.
© 2024 Institutional Capital Network, Inc. All Rights Reserved. | 2024.06
