What is Annuity Suitability?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Annuity Suitability Explained:

Annuity suitability refers to the appropriateness of an annuity investment for a potential investor, based on specific financial thresholds and criteria. This concept ensures that annuities are recommended only to those who are financially equipped to handle them.

Annuity Suitability

Key Criteria for Annuity Suitability:

  1. Total Household Income: The household income should be sufficient to support the investment in an annuity without jeopardizing the investor’s financial stability.
  2. Total Liquid Assets: Investors should have at least $85,000 in liquid assets. Liquid assets are those easily converted to cash, ensuring that the investor has enough funds available for emergencies or other needs without relying on the annuity.
  3. Percentage of Retirement Assets in Annuities: No more than 60% of an investor’s retirement assets should be in other annuities. This diversification ensures that the investor’s retirement portfolio is not overly concentrated in annuities, which can be less liquid and more complex than other investments.

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Annuity Suitability Guidelines

Importance of Annuity Suitability:

Risk Management: Ensures investors do not overexpose themselves to the risks associated with annuities, such as interest rate risk and the risk of issuer default.

Financial Security: Protects investors by ensuring that they have sufficient liquidity and are not overly reliant on annuities for retirement income.

Investment Appropriateness: Assures that the annuity matches the investor’s financial goals, risk tolerance, and investment horizon.

Annuity Suitability Guideline

Annuity Suitability Criteria

Total Household IncomeSufficient income to support annuity investmentEnsures financial stability
Total Liquid AssetsMinimum of $85,000 in liquid assetsProvides emergency funds and flexibility
Retirement Asset AllocationMax 60% in other annuitiesPromotes diversification and risk management
Annuity Suitability


Understanding annuity suitability is crucial for making informed investment decisions. It revolves around ensuring that annuities are a fitting part of an investor’s financial plan based on their income, liquid assets, and existing retirement investments. By adhering to these guidelines, investors can maintain a balanced and secure financial portfolio.

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Annuity Suitability Guidelines

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Frequently Asked Questions

What determines annuity suitability?

The annuity suitability guidelines help ensure that annuities are sold suitably for the specific customer. These guidelines consider the customer’s financial situation – such as their income, assets, and investment objectives – to determine whether an annuity is a suitable investment option.

What is an annuity suitability questionnaire?

An annuity suitability questionnaire is a tool used by financial advisors to assess whether an annuity product is suitable for an individual. The questionnaire typically includes questions about the individual’s financial goals, risk tolerance, and investment time horizon. This helps advisors determine whether an annuity aligns with the individual’s needs and circumstances.

What is a variable annuity suitability evaluation used for?

Variable annuity suitability refers to the evaluation of whether a variable annuity is suitable for an individual based on their financial goals, risk tolerance, and investment knowledge. It involves considering factors such as the individual’s investment time horizon, liquidity needs, and ability to bear market fluctuations. Variable annuity suitability ensures that the investment aligns with the individual’s needs and objectives.

Who regulates annuities?

Annuities are regulated by various entities, depending on the country. In the United States, annuities are primarily regulated by state insurance commissioners. These regulators oversee the sale and marketing practices of annuities, ensuring that consumers are protected and that companies abide by the rules and regulations governing these financial products.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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