Annuities are often seen as set-it-and-forget-it investments, offering retirees a reliable income stream without the risks of more volatile investments. However, even if you’re client is happy with their current annuity, it might be worth revisiting their contract. Changes in interest rates, inflation, and the availability of newer annuity products could mean your clients could improve their financial situation by switching to a different plan. Here are three reasons to consider an annuity “refresh”:
- Higher Interest Rates
Interest rates have been on the rise recently, and when rates go up, so do annuity income rates. If your client purchased an annuity before March 2022, they may not be taking advantage of these higher rates. Replacing the current annuity with a new one could lead to larger payouts, and comparing options won’t cost your client anything. - Inflation’s Impact
Inflation can significantly reduce purchasing power over time, especially for retirees living on a fixed income. The rapid rise in consumer prices since 2021, from groceries to housing, has made this issue even more apparent. If your client purchased an annuity before 2021, it may no longer be enough to cover rising living costs. Swapping for a more inflation-friendly annuity could help stabilize their budget. - Newer Products May Offer Better Options
The annuity market has become more competitive, and insurers are now offering a wider range of products to meet the changing needs of retirees. With options like fixed-index annuities, or products that include better terms and lower fees, clients may find that a newer annuity fits their goals more closely than their current one. Regularly reviewing your client’s annuity, especially after significant life changes like marriage, health shifts, or updated income needs, can help ensure it still aligns with their financial plan.
Considerations Before Making Changes
Before replacing an annuity, be sure to weigh any tax implications, surrender charges, and other potential costs. While it may be tempting to switch to a new product, it’s important to understand all the terms to ensure it aligns with your long-term objectives. Our Annuity Team can help evaluate whether this is the right time to make a change, particularly since interest rates may drop in the future, making current options less attractive. Reach out to our Annuity Team at Wholehan Marketing to see what options we find to benefit your client’s portfolio today!