News and Commentary

Is Now the Time to Consider Insurance Products to Generate Guaranteed Income in Retirement? by Scott Montgomery, CLU, ChFC

The recent market gyrations and prospects of a longer-term recession in the wake of the COVID-19 health crisis has raised red flags for many investors, especially those nearing or entering retirement. With such an uncertain future, soon-to-be retirees are increasingly turning to annuities to help diversify and protect their retirement savings while creating a steady and predictable income stream for all their remaining living years. Determining whether annuity products are right for you requires careful assessment to ensure they align with your unique needs and broader estate-planning goals.

Both immediate annuities and deferred annuities are contracts between you and a life insurance company that invests your money for you and, in return, agrees to provide you with guaranteed income payments today or in the future for the rest of your life, regardless of how long that may be. Alternatively, with variable annuities, you, rather than the insurance company, decide how to invest your capital to meet your income needs. Many annuity companies offer a “rider” which you can add to a variable annuity for an additional fee that can guarantee you some level of income that you cannot outlive much like the traditional annuity.  Each of these annuity products help to reduce the possibility that you might outlive your savings and income. Instead, they provide the reassurance that you will continue to receive payments of principal and interest even if you live longer than an insurer estimates and the total payouts of the annuity exceed the original account value. Delete red

There are a wide variety of annuity products offering a range of flexible options to help meet everyone’s individual needs. For example, you can fund an annuity with a single, lump-sum payment or you may schedule a series of payments to be invested over time. A contract may cover one individual, or it may provide for two individuals, in which case, a surviving annuitant will continue to receive income payments after the other annuitant passes away. You may select a fixed rate of return based on interest rates that are higher than the prevailing savings rates one or a variable annuity whose guaranteed payments are based on the performance of a particular market index, such as the S&P 500. With index and variable annuities, you may receive some of the benefits of a rising market without exposing yourself to all the risks of an economic downturn.

While life-only annuity contracts do not provide a mechanism for refunding undistributed balances upon the death of the account owner, other policies allow you to select a death benefit of unused funds to go to your named beneficiaries when you pass away. These riders allow you to provide for your heirs after you are gone, but they do come with the caveat that the longer the refund period, the lower the payout you will receive while you are alive.

Determining what type of annuity is best for you requires some reverse engineering of your finances based on your expected expenses in retirement and your ability to cover those costs with projected future income from Social Security, required minimum distributions from retirement plans, such as 401(k)s and IRAs, and any other sources. By working with professional financial advisors, you can help to ensure that that the annuity you select today meets your future income needs, especially when considering today’s environment of low interest rate, increased market volatility and future uncertainty.

About the Author: Scott Montgomery is a director with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services.  For more information, call (954) 712-8888 or email

Provenance Wealth Advisors (PWA), 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Scott Montgomery is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.

Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of the advisors of PWA and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investments mentioned may not be suitable for all investors.

Deferred annuities are long-term investment alternatives designed for retirement purposes. Surrender charges may apply fir early withdrawals and, if made prior to age 59½, may be subject to a 10% federal tax penalty in addition to any gains being taxed as ordinary income. Guarantees are based on the claims-paying ability of the issuing company.

Investors should consider the investment objectives, risks, and charged and expenses if variable annuities carefully before investing. The prospectus contains this and other important information about the annuities. Prospectuses are also available for your financial advisor and should be read carefully before investing. An investment in these annuities involves investment risk, including possible risk of principal. The contracts, when redeemed, may be worth more or less than the total amount invested.  Past performance is no guarantee of future results. With variable annuities, any withdrawals may be subject to income taxes and, prior to age 59½, a 10% federal penalty tax penalty may apply. Withdrawals from annuities will affect both the account value and the death benefit. An annual contingent deferred sales charge (CDSC) may apply.

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market, Keep in mind that individuals cannot invest directly in any index. Investing involves risk, and you may incur a profit or loss regardless of strategy selected.

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Posted on September 9, 2020