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In some instances , annuities can be the perfect retirementplanning solution tool .

By Ben Mattlin

Here are some real-life stories that advisors say demonstrate the potential power of an annuity to solve particularly knotty problems .

Retirement Income

Mike Salierno , an advisor for Northwestern Mutual who founded Eterna Generational Planners in Clearwater , Fla ., had a client who was preparing for retirement . After reviewing her entire financial situation , he determined that , even with Social Security , her potential monthly retirement income would fall some $ 2,000 short of what she needed for necessary and discretionary spending .

“ Our belief is that fixed , non-negotiable expenses need to be covered by fixed , guaranteed income ,” he explains . That guaranteed income may come from a pension and Social Security , he says , but if they aren ’ t enough , an income annuity can be the perfect solution .

He showed the client how putting some of her IRA savings into a fixed annuity would give her the dependable monthly income she needed to cover the shortfall , without affecting other portfolio assets . A fixed annuity , he says , as opposed to a variable annuity with a lifetime income rider , suited the client ’ s aversion to volatility where her income needs were concerned . “ She didn ’ t want to have to worry about market conditions on a monthly basis to know that she would be able to pay her bills on time ,” he says .

Another advantage of an income annuity for this client , he says , was the easy , set-it-and-forget-it factor . The income stream is “ as automated as possible ,” which suits clients who “ never had to manage their finances .” He adds that “ once issued , this annuity cannot be terminated [ or ] surrendered , and the premium paid for the annuity is not refundable and cannot be withdrawn ” without penalty .

Reduced RMDs And Taxes

A different type of annuity proved the ideal solution for another client , a man in his 70s whose required minimum distributions from retirement accounts were much higher than his retirement-income needs .

For this client , Salierno says , the RMDs were so high that they caused a big tax issue , pushing him into a higher tax bracket . Worse still , they forced him to take distributions regardless of market conditions , depleting his portfolio ’ s potential .

A qualified longevity annuity contract ( QLAC ) proved to be the perfect answer . These contracts are deferred income annuities funded by a qualified retirement plan or IRA . They are exempt from required minimum distributions until the account

NOVEMBER 2024 | FINANCIAL ADVISOR MAGAZINE | 47