How Fixed Annuities Fit Into Your Financial Plan
Ultimately, the decision whether an Annuity is suitable rests with the consumer, but it's also the responsibility of the insurance agent and Guggenheim Life and Annuity Company (“Guggenheim Life”) to provide tools to help assure that the client is making a good choice. Guggenheim Life has developed a suitability questionnaire that is completed along with the application. This checklist is designed to aid in the purchase process; allowing Guggenheim Life a clear understanding of the overall financial status and needs of the consumer. The goal is for the client to answer the questions on the form with the agent at the point of sale. The specific needs of each and every client are reviewed at the time of a new annuity purchase, assuring our clients’ best interests are being served.
Fixed Annuities are financial products that can serve a variety of needs. These contracts, assuming the funds are held to the end of the Guarantee Period, may provide a safe haven for growth with important guarantees related to principal. Because returns are not taxed until withdrawn from the contract, Annuities enjoy the advantage of compounding in three ways: Interest is earned on deposits; interest is earned on interest; and interest is earned on money that would have gone to pay taxes, if that money had been placed in a product that is immediately taxable. Within a well-developed financial plan, Annuities enjoy tax deferral on funds left to accumulate, perhaps deferring those taxes to retirement when a client’s income tax bracket may be lower. Annuities may also aid in the inter-generational transfer of wealth because Annuities, when structured to pay a death benefit directly to a named beneficiary, avoid the probate process.
Most personal financial plans have different categories of money set aside to serve different purposes: readily available cash, both long and short term investments, and emergency funds. Annuities should be considered a long term commitment. Working with an agent, clients can determine exactly what they want to accomplish with an Annuity. Again, it's important that consumers considering an Annuity have a good understanding of their own situation. Before deciding on an Annuity, consumers need to clearly identify their financial goals:
- What is my overall financial strategy?
- What does the purchase of an annuity need to provide?
- Do I need growth, income, or some combination of the two?
- How soon will I need the money in the annuity?
- If I purchase an annuity, will I have sufficient liquid assets to deal with emergencies?
During the review process with your agent, there are other questions to consider:
- Will the contract provide a balance of liquidity and interest I need?
- What is my overall investment risk tolerance?
- Are the Surrender Charges and Market Value Adjustment provisions clear and fully understood?
- What are the options at the end of the Guarantee Period, at the contract maturity, or at my death?
It is our hope that our clients will be well informed and satisfied with the contracts they purchase from us. At Guggenheim Life, our mission is to provide Fixed Annuities with the highest customer value, offer industry-leading service, and always remember that we owe our greatest loyalty to our clients.
Guggenheim Life does not provide legal or tax advice to policyholders or prospective policyholders. For legal or tax advice concerning your specific situation, you should consult your attorney, accountant or tax advisor.