Why High Net Worth Individuals Use Annuities

Shawn Plummer

CEO, The Annuity Expert

People spend years sacrificing and saving to build their net worth but can find their net worth decreasing due to downturns in the markets.

Annuities And The Wealthy

Do you want to know one of the best-kept secrets of high-net-worth individuals? They use annuities for a variety of reasons, including estate planning, tax savings, and more. In this guide, we will discuss some of the most common reasons why high net worth individuals use annuities. We will also provide you with some helpful information on how to get started with an annuity if you are interested in this type of investment.

Why Use Annuities?

People spend years sacrificing and saving to build their net worth but can find their net worth decreasing due to downturns in the markets. As a result, high net worth individuals are looking for income and the safety of their principal.

The adage that an investor is more concerned with the return of his principal than with the return on his principal is more applicable now than ever before.

Diversification of investments, investment media, the safety of principal, and limited market exposure are all part of the lexicon in which the High Net Worth individual finds themself.

Insurance and annuities have always been fundamental building blocks of personal financial planning.

Annuities were panned because, when taxed, the asset does not get preferential tax treatment.

13 Reasons Why High Net Worth Individuals Buy Annuities

  1. High Net Worth individuals often take their pensions in a lump sum and do not have sufficient income for retirement, thus needing a source of funds for fixed expenses.
  2. Annuities can provide guaranteed income through conversion to a Single Premium Immediate Annuity (SPIA) today or use an income rider in the future.
  3. Fixed and fixed index annuities provide guaranteed income with the ability to earn interest.
  4. Fixed and fixed index annuities shelter income from being taxed until the owner decides to take the income.
  5. Fixed and fixed index annuities provide a limited risk to their principal.
  6. Individuals avoid taking the money they need each year out of investments due to a fear of running out of money. Fixed and fixed index annuities with minimum guarantees help individuals overcome this fear by providing withdrawal options that may be free of surrender charges.
  7. Fixed and fixed index annuities provide the future principal required to take care of a surviving spouse, a child, or even charity.
  8. Fixed and fixed index annuities can help protect capital, maintain access to funds (subject to a surrender charge), and may provide a superior rate of return when compared to CDs and treasury bonds.
  9. Split annuity strategies can replace CDs by replacing and enhancing the income through a SPIA, while the remaining principal grows back to the original sum in a fixed deferred annuity.
  10. Annuity wealth transfer allows individuals who have had annuities for a long period of time to use these annuities to fund a life insurance policy out of the High Net Worth client’s estate.
  11. Using a fixed annuity to stretch out IRA distributions for multiple generations can help provide safety while maximizing benefits for parents and children.
  12. Using an existing fixed annuity to fund a life insurance policy for loved ones can benefit family members while providing potential retirement income.
  13. Fixed and fixed index annuities may provide the security and financial comfort High Net Worth individuals seek when they retire and should be a part of each individual’s financial strategy.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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