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Does Laddering Annuities Make Sense for Your Clients?

With Annuity Awareness Month in full swing, AIP Marketing Alliance is developing even more marketing materials to help our independent wholesalers and agents explain annuity benefits to their clients. A fluctuating stock market and unstable economy have contributed to more consumers seeking a “safer” retirement planning strategy for their dollars.

Most people choose to purchase an annuity because an annuity can provide guaranteed lifetime income through a fixed stream of payments (based on the claims-paying ability of the issuing insurance company).

Sometimes, your client may not want to tie up money for a longer period (seven or 10 years) in a Fixed Indexed Annuity (FIA) due to the surrender charges of the selected product. The client may opt for a short-term alternative, a Multi-Year Guaranteed Annuity (MYGA), which typically has a fixed rate for a shorter time frame (three to five years).

What happens if you have a client torn between a MYGA and a FIA based on the current market conditions? You may want to offer a laddering strategy instead, if this concept fits your client’s retirement plans.

This strategy involves purchasing multiple annuities over different periods of time to receive potentially higher interest rates and payouts. For example, your client has $400,000 – instead of placing all those dollars into one annuity product, he or she could place various amounts into different products.

Your client could place $100,000 into a three-year MYGA, $100,000 into a five-year MYGA, and then $200,000 into a seven-year FIA. After three years, the first annuity (MYGA) will come up for renewal. Your client can withdraw the money, recommit those funds for another three years, or extend the ladder by choosing a longer maturity.

Laddering does not fit every person’s retirement planning as multiple considerations need to be taken, such as withdrawals prior to age 59½, early policy surrender charges, the claims-paying ability of the issuing insurance company, and other conditions. Tax and legal questions should be directed toward the client’s tax or legal counsel.

AIPMA has created a customizable flyer to explain the laddering concept for annuities to share with your clients. Simply send your email request to marketing@aipma.com, and our in-house marketing team will incorporate your logo and contact information so you can share this document with your clients.

You also can contact our Business Development team at (800) 783-5206 press #2 to discuss this strategy or request an illustration to show your clients.

Contact Us

800.783.5206

2041 E. Square Lake Road, Suite 100, Troy, Michigan 48085-3897

About Us

For more than 35 years, AIP Marketing Alliance (AIPMA) serves as a premier life insurance and annuity distribution partner to provide full-service support to independent wholesalers, brokerages and agents from our Troy, Michigan office.