An annuity is a solid investment not only for many seniors but clients in pre-retirement 40+ because they are flexible investment vehicle that combines guaranteed lifetime income with tax-deferred savings and insurance benefits. There are several factors advisors should consider before recommending annuities to their clients.

Traditionally, annuities are beneficial for people who require lifetime payments and who want higher equity market returns combined with protection from market risk.

“Today’s annuity products offer greater liquidity, flexibility, and a broader range of features than in the past, and are uniquely designed to address longer life expectancies, increasing retirement horizons, and other new retirement realities,” says Mark Mackey, president of the NAVA.

According to Mackey, the age of the client is a very important factor when considering an annuity, but there are several other considerations that deserve attention. Other factors advisors should consider before recommending annuities to clients include:

* The client’s retirement goals and objectives: The client’s needs will differ depending on his stage of retirement and his personal goals.
* The client’s life expectancy and projected year of retirement: These two factors will change the effectiveness of an annuity as a retirement investment.
* Will the client need supplemental income during retirement? If a gap exists between the client’s available retirement income and his essential living expenses, then an annuity could be used as a supplemental source of income.
* Does the client need access to the money in the annuity? Most annuities charge fees if the client withdraws money in excess of the free withdrawal from the annuity during the early years of the contract. Also, many deferred annuities allow the client to withdraw a portion of the initial investment every year without a fee, or, in the case of a serious illness, all of the money in the annuity without a fee.

Additionally, an annuity is the only personal retirement investment in which the payments cannot be outlived by the retiree. Annuity death benefits can provide further protection of the retiree’s assets. However, the advisor must consider the fee structure of a particular annuity and should consider the reputation and financial strength of the company backing the annuity.