Deferred income annuities (DIAs) are an up-and-coming alternative to your clients’ retirement income needs. Industry followers have hailed them for creating a “pension-like” income stream. They defer payments for several years, allowing for a higher lifetime annual income payment amount. One primary benefit for purchasers of these DIA products is that they will know the exact amount of their annuity payments, and the full extent of their income payment period.
DIAs were introduced relatively recently and comprise less than 1 percent of total annuity sales. That share is sure to grow, as sales of DIAs increased 151 percent from the first half of 2012 to the first half of 2013, according to LIMRA1. The number of carriers offering DIAs has increased to at least 12.
Creative Marketing provides our producers access to several DIAs, most notably the Future Income AchieverSM Annuity from American General Life Insurance Company, and the Lincoln Deferred Income SolutionsSM Annuity from Lincoln Financial Group, which launched in early September.
Both products offer a single premium contribution of up to $1 million and many income payment options including single lifetime, a joint and survivor’s lifetime, and joint and contingent survivor. The two products also provide an option whereby your client can receive an accelerated distribution equal to six months worth of income in a lump sum (restrictions apply).
For a full list of features on these DIAs, use Annuity Solutions PRO, Creative Marketing’s proprietary annuity product database. Located on CreativeMarketing.net, Annuity Solutions PRO also allows you to easily order electronic sales kits for both products.
You can generate a quote for both the Future Income Achiever Annuity and the Lincoln Deferred Income Solutions Annuity using Creative Marketing’s SPIA Solutions quote system. This web-based program is available on CreativeMarketing.net by clicking the Products tab. SPIA Solutions offers quotes from multiple carriers, giving you the ability to determine the best annuity income fit for your clients.
Why a Deferred Income Annuity?
The growing popularity of DIAs is due in part to the income transparency they provide clients. On the date of purchase, your client will make two choices:
- The client will select when they will take their first payment. Typically, income must be deferred at least one to two years, depending on the product, and it has to begin no later than 40 years from purchase. Qualified contracts typically must begin distributions at age 70, while nonqualified contracts may allow deferrals until age 85 or 90, depending on the product.
- The client will also select how long they will receive income. This can be for a certain period, for life or for a combination of the two. The exact amount of those payments is determined at the outset, and does not change over the life of the contract, though both products have optional Annual Increase Options that will increase payouts by a certain percentage or flat dollar amount or by a COLA adjustment.
DIAs typically fit the profile of a client who has a long-term time horizon, wants to lock in a sizable portion of their retirement income need, and prefers to know exactly how much retirement income they will receive and for how long.
Sales scenarios in which a DIA may fit your client include:
The Gap Sale: If a client anticipates retiring early and wants a stream of income prior to collecting Social Security and/or withdrawing from an IRA or 401(k), a DIA can provide that income.
The Supplemental Sale: Clients could defer income payments until age 70 and then supplement their other income streams to help maintain their lifestyles.
The Late Retirement Sale: DIAs allow clients to defer income as long as age 85 or 90 (depending on the product) for nonqualified contracts. A client could use the DIA payout to provide an income stream if other assets are depleted or to cover late-life health care costs.
Discover more about Deferred Income Annuities by calling your Creative Marketing team at 800.992.2642.
FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC 13052 – 2013/10/23
Lincoln Deferred Income Solutions Annuity (contract form 13-618S and state variations) is issued by The Lincoln National Life Insurance Company, Fort Wayne, IN, and distributed by Lincoln Financial Distributors, Inc., a broker-dealer. Future Income Achiever(r) Annuity (AGLC106230, AGLC106377, AGLC106378) is issued by American General Life Insurance Company (AGL) Houston, TX. The underwriting risks, financial and contractual obligations and support functions associated with products issued by AGL are its responsibility. AGL does not solicit business in the state of New York. Annuities not available in all states. Availability of products and features varies by state
1. LIMRA, U.S. Individual Annuities Sales survey (2013, second quarter)
Like single premium immediate annuities or SPIAs, DIAs permanently convert your client’s premium to an income stream. However, depending on the product, there may be some flexibility as to changing the payment start date or taking a lump sum “withdrawal” know as a commutation benefit.