Secret #4: Annuities Are Not Life Insurance — They Are Income Protection Tools
What Is an Annuity?
• An annuity is a contract with an insurance company designed to help create income, usually for retirement.
• Life insurance protects against dying too soon.
• Annuities protect against living too long and running out of money.
1. Fixed Annuity
The Safe Growth Contract
What It Is: A fixed annuity provides a guaranteed interest rate for a specific period.
How It Works? You deposit money with the insurance company. The company credits a fixed rate.
Example: Deposit: $100,000
Rate: 5%
Annual growth: $5,000
What Makes Fixed Annuities Good
Fixed annuities may be good because they offer:
• Principal protection
• Predictable growth
• No stock market loss
• Tax-deferred growth
• Retirement income options
Best Client Fit
Fixed annuities may fit:
• Conservative investors
• Retirees
• People near retirement
• Clients who do not want market risk
Monetary System: Best for clients with savings of: $50,000–$500,000+ who want safety and predictable growth.
2. Fixed Indexed Annuity
The Protection Plus Growth Potential Contract
What It Is: A fixed indexed annuity credits interest based on the performance of a market index, but the money is not directly invested in the market. How It Works? If the index performs well, the annuity may earn interest subject to caps or participation rates.
If the index goes down, the contract may protect principal from market loss.
What Makes Indexed Annuities Good
They may offer:
• Market-linked growth potential
• Principal protection
• Tax-deferred growth
• Lifetime income options
• Retirement stability
Best Client Fit
Indexed annuities may fit:
• Pre-retirees
• Retirees
• Conservative growth clients
• People worried about losing money in the market
• Clients wanting lifetime income
Monetary System : Best for clients with: $100,000–$1,000,000+ in retirement savings who want protection and income planning.
3. Immediate Annuity
The Retirement Paycheck Contract
What It Is: An immediate annuity starts paying income shortly after money is deposited.
How It Works?
Example: Client deposits $250,000 into an immediate annuity. The insurance company pays monthly income based on age, rates, and payout option.
What Makes Immediate Annuities Good
Immediate annuities may be good because they can provide:
• Guaranteed income
• Monthly retirement paycheck
• Simplicity
• Reduced fear of running out of money
Best Client Fit
Immediate annuities may fit:
• Retirees needing income now
• People without pension income
• Clients who want predictable monthly checks
Monetary System: Best for clients age 60+ with: $100,000–$500,000+ who need income immediately.
4. Variable Annuity
The Market-Based Annuity
What It Is: A variable annuity allows money to be invested in subaccounts similar to mutual funds. How It Works? The account value rises or falls based on market performance.
Some may offer optional riders for income or death benefits.
What Makes Variable Annuities Good
Variable annuities may provide:
• Market growth potential
• Tax-deferred growth
• Optional income guarantees
• Investment flexibility
The Risk
Because funds are market-based, the account value can decline.
Fees may also be higher than other annuity types.
Best Client Fit
Variable annuities may fit:
• Higher-risk investors
• Long-term retirement savers
• Clients who want market exposure with insurance features
Monetary System: Best for clients with: $100,000–$1,000,000+ who understand market risk and fees.