Allianz Retirement Foundation ADV®, a Fixed Index Annuity (FIA), is designed to provide asset protection with some growth potential to facilitate the transition from the accumulation to decumulation.
In 2021, fixed index annuity sales reached $63.7B, a 15% increase from 2020. Improved interest rates and product innovation around cap rates helped make these products more attractive to advisors and clients alike. FIAs remain a highly popular product for investors seeking market growth with complete principal protection and the ability to add guaranteed lifetime income through a rider. As more investors seek ways to combat inflation, FIA popularity is only expected to increase.
Why DPL Likes Retirement Foundation ADV®
Retirement Foundation ADV® and it's living benefit rider (available for an additional cost) offers a guaranteed lifetime payout rate for predictable income that grows every year until income is taken. Assets can be allocated among a fixed interest allocation and four indexed interest allocations to help achieve client goals. Indexing is simplified via point-to-point crediting with a cap using a 100% participation rate, meaning the entire percentage of index change is used when calculating the interest rate (with application of cap).
When converted to an income stream, the product offers two payout options: one that provides predictable payments throughout the client’s life, or—for those concerned with rising costs of living in retirement—payments that have the potential to increase in exchange for a lower initial payment rate.
How to Think About Commission-Free FIAs
One advantage of utilizing FIAs is to leverage the scale of insurance carriers to deliver strong pricing in a packaged product, making it comparatively easy to implement, while also getting guaranteed downside market protection from the carrier.
Many FIAs offer optional guaranteed lifetime income riders for an additional cost. While guaranteed income options from FIAs are generally a bit lower than those of single premium immediate annuities (SPIAs), they generally have greater liquidity and flexibility.
When your client needs:
PRINCIPAL PROTECTION: With the principal protection from market downturns provided by FIAs, they should be considered for clients nearing or in retirement to help mitigate sequence of returns risk.
FIXED INCOME: FIAs can be viewed as a fixed income replacement as client portfolios are de-risked from equities. They provide sequence of returns protection for those entering or in retirement, with an overall return above 6%, based on historic averages.2
GUARANTEED LIFETIME INCOME: FIAs can be used to generate guaranteed lifetime income with allocation flexibility and a level of liquidity (beyond the surrender period).3
Product information sourced directly from http://www.allianzlife.com.
12021 Annuity Sales Highest In 13 Years, LIMRA Reports (2/2022)
2Fixed Indexed Annuities as a Fixed Income Alternative for Near-Retirees, Wade Pfau. (5/2019)
3FIAs may be subject to surrender charges, market value adjustment, and taxation for early withdrawals
While the interest rate credited to an indexed account is linked to the performance of an underlying index, premium payments made to a fixed index annuity are never directly invested in the stock market.
All guarantees are based on the financial strength and claims-paying ability of the issuing insurance company.
The purchase of an annuity within a retirement plan that already provides tax deferral under sections of the Internal Revenue Code results in no additional tax benefits. An annuity should be used to fund a qualified plan based upon the annuity’s features other than tax deferral. All annuity features, risks, limitations, and costs should be considered prior to recommending the purchase of an annuity within a tax-qualified retirement plan.
Distributions are subject to ordinary income tax and, if taken prior to age 59½, a 10% federal additional tax.
Retirement Foundation ADV (C95493,R95374) is issued by Allianz Life Insurance Company of North America