Advising The New Longevity

Evaluating Today’s ‘Safe Money’ for Clients

Now, annuities can provide a more stable investment in lieu of bonds

by John Williams

Mr. Williams is Regional Sales Director East, for Individual Annuities at The Standard. Visit

We’re all aware of the recent economic uncertainty, but many people may not understand how it is impacting the investment landscape. In particular, the bond market has had many shifts in recent months, raising questions about its stability with many people. Bond yields have dropped as a result of the economic impact of the global pandemic and in the wake of this shift, clients are naturally growing more concerned about the money that has historically been viewed as the most stable in their investment portfolios. People have tended to invest in bonds for safety. They are now seeing on the news or on their monthly statements that there may be a cause for concern with these investment choices that they may be relying on for stability.

There is a great deal of unknown in the current economic landscape, with the bond market, in particular, experiencing a lot of that volatility head-on. These new realities should cause people to reconsider how they are approaching their retirement investment strategy. Are bonds still the appropriate avenue for ‘safe money’ and will clients be able to rebuild confidence in them moving forward? Advisors who aren’t helping clients understand that they have additional options for their safety net investments are missing a crucial opportunity to support their clients.

An Open Door To Talk To Your Clients

Advisors should be talking to their clients about these current dynamics to ensure that investors have all the information available to make the most educated choices for future planning. Some clients may already be experiencing turbulence with their bond investments and may be looking for other, more stable options. Others may have pulled out their money and are keeping it on the sidelines, unsure of what steps to take next. The current economic landscape provides an open door to ask these clients if, when and how they are going to replace their less-risky investments.

Annuities play a valuable role in the conversation, even if just for the awareness and education of a client. Deferred annuities can offer a more secure solution for stable money in a client’s retirement investment portfolio, but it’s important to help them understand that annuities and bonds aren’t an even trade-off. There are many differences between annuities and bonds, and understanding a few key distinctions will help clients make more informed decisions about optimal low-risk investment options. After all, some of these key differences had an impact on the perceived instability of bonds over the past few months.

There are greater tax benefits with annuities

There are many differences between annuities and bonds, and understanding a few key distinctions will help clients make more informed decisions about optimal low-risk investment options....

Deferred annuities offer tax-deferred growth when compared to taxable investments like bond mutual funds or corporate bonds. A deferred annuity grows tax-deferred until the contract is put into a payment stream or paid out as a lump sum. Understandably, the tax-deferred status of deferred annuities has led to an increase in their popularity. There is also a triple-compounding nature to these annuities, in which owners earn interest on the initial premium payment, the interest itself, plus the amount they would have paid in annual taxes over the contract. By comparison, corporate bond interest payments are typically not deferred and are generally taxable when earned. Thus, bond payments do not compound tax savings as an annuity does. It’s important to educate clients about how tax payments can impact both current and future finances. With tax-deferred options, clients won’t be burdened with making tax payments on their investments during times of economic hardship, like the current global pandemic, and their money can grow tax-deferred, despite any market volatility.

Annuities offer customizable options for a secure investment

Many clients invest in bonds strictly as a safe investment option for their financial portfolio. However, there is a lot less control over the particulars of a bond purchase versus an annuity purchase. With annuities, clients can choose an immediate or deferred annuity, which determines when their payments will begin. They can also choose a fixed-rate or indexed annuity, which helps govern the returns a client is guaranteed or can expect. Finally, they also have a wealth of additional choices to customize ‘safe money’ for their unique needs, including their contribution and payout options. All of these choices allow clients to have a greater sense of visibility and control over their investment, growing their financial confidence.

Having frequent conversations with clients about their portfolio, especially during times of market uncertainty, will help advisors demonstrate their commitment to helping clients. Consulting on safe investments that provide clients with effective options to replace unstable investments also allow advisors to give valuable support to clients. It’s important that clients know they have choices when it comes to their future stability and that they shouldn’t have to resort to high-risk investments if their bond yields fall, as they have for many of the past few months. As unpredictable as the market has been this year, it’s now more important than ever to identify and provide transparent, viable solutions to help clients build and protect their assets. Advisors are uniquely positioned to help bring confidence to clients during market shifts, especially those that impact their safety net.