Financial goals and challenges vary widely from client to client. In fact, any client’s main financial concerns can change as their life progresses from one stage to the next. They might start off focused on accumulation and shift to value income generation as retirement nears. Down the line, that same client may prioritize leaving a financial legacy for loved ones.
Or, one client may want to address all three areas at once.
Wide-ranging—and often shifting—client needs, combined with the risk associated with volatile markets and generally low returns on conservative investments, highlight a need for adaptable investment strategies. One solution that deserves close attention is the registered index-linked annuity, or RILA.
Investors today are often concerned about major disruptions and their impacts on markets. They want to grow their portfolios, but wild market swings may hold them back. They just might not have the stomach for the potential downside risk that comes with market participation.
Financial professionals need strategies that enable clients to take advantage of market growth, but also help safeguard against major loss when markets fall.
It’s all about finding the right balance between upside potential and downside protection. For some clients, a RILA may be the right fit to help clients appropriately address risk so they can confidently invest in growth opportunities they might otherwise avoid due to risk.
What is a RILA?
Registered index-linked annuities are emerging as a useful solution for many retirement investors. A RILA is a deferred annuity that combines characteristics of fixed index annuities and variable annuities to offer growth opportunities while helping to limit downside risk.
A RILA is linked to the performance of a major market index to calculate gains or losses. But with a RILA, clients can personalize their level of exposure by choosing their individual gain and loss limits, implemented as a floor and/or a buffer.
A RILA’s performance can fluctuate similarly to the market it’s linked to, but its combination of buffers and floors can help limit losses when markets drop. This downside protection is generally balanced by a cap on growth.
The result is a personally tailored balance of risk and return potential that may be especially empowering to clients who want to grow their portfolio while also protecting their hard-earned nest egg.
How RILAs can help clients diversify
In recent years, even amid market volatility and economic disruption, inflation has stolen the spotlight for its ability to chip away at investment gains. Would-be investors may find themselves between a rock and a hard place: conservative investment options may not keep pace with inflation, while market volatility adds considerable risk to growth opportunities.
That can have some clients looking for different options to achieve higher returns while limiting investment risk. And that’s where RILAs may offer an attractive choice for clients seeking a middle ground between high-risk, high-reward investments and more conservative options with lower potential returns.
A RILA can offer clients an option beyond traditional stocks, bonds and mutual funds, and their floors and buffers enable clients to diversify their risk levels within their investment portfolios. Because RILAs aren’t taxed until distributions are received, they allow for tax-deferred investment growth throughout the accumulation phase. At the end of the accumulation phase, a RILA can be annuitized to help diversify a client’s retirement income streams.
TruStage™ ZoneChoice and Zone Income Annuities
TruStage offers two RILAs designed to help clients address both their accumulation- and legacy-related goals. And TruStage Zone Income Annuity underwritten by MEMBERS Life Insurance Company includes features to help address client concerns related to lifetime income, too.
TruStage ZoneChoice Annuity
TruStage ZoneChoice Annuity, underwritten by MEMBERS Life Insurance company, combines 12 distinct accounts within one product. Clients can allocate their purchase payment into different accounts for a highly individualized strategy that balances growth potential and protection. Clients can select from buffers, floors, a declared rate account, or a combination of these options. They receive interest linked to the performance of their selections over one-year or six-year terms.
Because TruStage ZoneChoice Annuity allows for investment growth without the burden of contract, administrative or upfront fees, it can be a cost-effective solution for many clients looking to maximize their retirement savings. With contract value accessibility in times of critical need or health hardships and death benefit protection for the policyholder’s loved ones, clients choose it to round out their portfolios with features that traditional investments just don’t offer.
TruStage Zone Income Annuity
TruStage Zone Income Annuity is designed to guarantee lifetime income while growing a client’s investment — an important consideration for clients concerned about whether their retirement savings will stand up to longevity risk, inflation and their future expenses, like healthcare costs.
With Zone Income, clients choose their account allocations linked to the performance of their selected market indexes. For index-linked accounts, they select how much to place into each of two risk control accounts:
- The Secure Account has a declared rate cap and a 0% floor, protecting against market downturns and providing modest growth potential.
- The Growth Account has a higher declared cap and a -10% floor — for greater growth potential with a limit on potential for loss.
Clients can adjust their comfort zones every year, enabling them to adapt and respond to changing market conditions or personal circumstances. A Guaranteed Lifetime Withdrawal Benefit helps ensure they won’t outlive their savings, and return of purchase death benefit can help them leave a legacy for those they care about most.
Diversification, risk control and protected income are more important than ever
As economies become increasingly complex and people live longer lives, it’s increasingly important for financial professionals to help clients find ways to protect and secure their financial futures. And TruStage is here to help.
Learn more about ZoneChoice and Zone Income annuities, as well as fixed annuities and variable annuities available from TruStage, and get valuable, free resources to help strengthen client relationships and grow your practice. Contact the TruStage Annuities sales desk at 1.877.345.GROW (4769), option 1, or find your team to get started today.
