Do you have clients concerned about rising costs in retirement? According to a recent study 86% of respondents said they are interested in a financial product that not only provided guaranteed income in retirement but also the opportunity for income to increase.
The opportunity for income increases in retirement may be essential to help address rising costs during retirement such as healthcare, inflation, and taxes.
In addition to protecting your client’s principal from market downturns, providing tax deferred growth potential, and a death benefit, some fixed index annuities also offer guaranteed retirement income that can increase.
With an index annuity your client’s income can increase following any year their chosen allocations earn interest. Typical income benefits found on variable annuity contracts have a separate value that lifetime income withdrawals are based upon. This value must be exceeded before an increase in income is earned. With index annuities previous lifetime withdrawals, fees, or index losses do not factor in. Every year interest is credited, the income will increase by the same percentages. Every time the client earns an increase the new higher payment is locked in.
Why is this important? Increasing Income can help protect your client’s retirement income from taking at HIT… Increases in Healthcare costs, Inflation, and Taxes are three big reasons your client’s retirement income may not go as far as they think. Statistics show that people are living longer and taking at HIT can erode their purchasing power down the road in retirement.
Healthcare needs generally increase as clients get older while the cost of medical care has risen by almost 75% over the last decade. Historically the general inflation rate for goods and services has been about 3% per year. At 3% inflation your money could purchase half of what it used to over a 25 year period. Today inflation is up over 5%. There is also the possibility of higher federal, state, and local taxes too.
So, while we don’t know exactly how much income clients will need in retirement, we do know these unpredictable rising costs, the HIT, could lower clients purchasing power and their standard of living.
Give Wholehan Marketing a call to learn more about how increasing income works on your next case.