Social Security itself is a giant annuity; it provides a guaranteed stream of lifetime income benefits. The earlier clients decide to file, the lower the benefit amount since that benefit amount will be paid out for a longer period of time.
If a client files at 62 and has a life expectancy of 82, that is 20 years that the Social Security Administration will probably provide income payments for the client.
Adding an individually owned annuity to the client's retirement plan can help make the Social Security filing decision easier, by ensuring that the client will have two guaranteed streams of income to rely upon.
There are three main benefits to owning a private annuity in conjunction with the big government annuity, Social Security:
- It provides additional income that may enable the client to retire sooner than the client had originally planned.
- It can help the client stay ahead of inflation by adding an additional stream of potential increasing income.
- It provides a joint income so that when a spouse passes, the surviving spouse can have the same level of income for the rest of the spouse's life.
Let us examine the third benefit; If a married couple has two Social Security checks each month and one of them passes, the surviving spouse is only able to keep one benefit check, not both. This can pose a huge cash flow issue in the future.
However, if the couple owns an annuity with lifetime income, that income may be able to replace the lost Social Security benefit. The couple is allowing the surviving spouse to have the same lifestyle.
There is also another added benefit to having an annuity within a married couple's retirement plan. While receiving the guaranteed lifetime benefit and protecting both spouses, a couple will also be fulfilling some, if not all, of the couple's required minimum distributions (RMD) from qualified retirement accounts.
Since 2020, the government has bumped up the RMD age to 72 for those who were not already subject to RMDs. Essentially, clients are forced by the government to start spending down their qualified retirement accounts (excluding Roths), so that they pay income taxes on that money.
Ask clients to ask themselves this: "If the government is going to force me to withdraw money from my retirement account, why wouldn't I want that income guaranteed for life?" An annuity can provide that solution and many others. Far too often, annuities are misunderstood or not fully understood.
Annuities are the only financial resource that can provide a guaranteed life income (pensions are also annuities). Who are the happiest people in retirement? Those worried about when the next market crash is going to occur, and if they will have enough money to survive, or those with a guaranteed lifetime paycheck?
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Roy Snarr, LACP, is the owner and manager of 
