How to use an Annuity Income Strategy

RightCapital is designed to elevate your advising practice to be head and shoulders above the crowd. One feature built into every subscription of RightCapital is the ability to model how annuity purchases can impact a client's retirement income needs. Advisors are free to propose multiple annuity purchases at any time within each financial plan. This is often a powerful tool for clients who may be getting close to retirement age.

Propose an immediate annuity purchase

To create and apply an annuity income strategy, navigate to  Retirement > Analysis, and use the Income strategy section in the action items to illustrate the impact of moving assets from existing accounts to different types of annuities.

1
To start, click Select an account next to the Income strategy. This will pull up a list of the client's investment accounts. Select the account to move to an annuity:

2
Once selected, use the drop-down boxes presented to select the type of annuity to transition the account into, as well as how money is intended to ultimately come from the annuity.

Under Annuity type, select between Variable, Fixed, and Indexed Annuities. For further details on the types of annuities, click here.

3
Under Distributions, select between:
  • Regular withdrawals: The annuity will be treated like any other investment and assets will be withdrawn as needed to fund cash flow needs.
  • Annuitization: The annuity will be annuitized based on the parameters set; the value will no longer be reflected as an investment and an income stream will be generated.
  • Lifetime income: Set up parameters for a lifetime income guarantee through a living benefit rider. Withdrawals will be reflected from the annuity while there is still value in the annuity; thereafter an income stream will be reflected.
4
Once the annuity is set up, click Confirm to return to the mainRetirement > Analysis screen.
5
Use the slider bar and/or text box to indicate how much to model moving from the existing account to the annuity (the slider will be capped by the total value of the account):

Click  Refresh to see the impact of the annuity on the proposed plan, reflected in the various tabs on the Retirement > Analysis page.

Propose annuity purchases in specific years

To create and apply multiple annuity purchases or specify a future annuity purchase navigate to the Retirement > Analysis area. Then use the action items to illustrate the impact of moving assets from existing accounts into different types of annuities. Use the steps below to model these scenarios:

1

In the Retirement Analysis Module select "Edit" within the action items.

2

Under the "Add New Item" menu, select "Annuity".

3

Fill out the details of the annuity purchase. All annuity options available in the Net Worth section are customizable here. For more information on annuity details, click here. The account type chosen to fund the purchase will determine whether the annuity is qualified, non-qualified, or Roth.

Under Distributions, select between:

  • Regular withdrawals: The annuity will be treated like any other investment and assets will be withdrawn as needed to fund cash flow needs.
  • Annuitization: The annuity will be annuitized based on the parameters set; the value will no longer be reflected as an investment and an income stream will be generated.
  • Lifetime income: Set up parameters for a lifetime income guarantee through a living benefit rider. Withdrawals will be reflected from the annuity while there is still value in the annuity; thereafter an income stream will be reflected.
4
Once the proposed annuity purchase is saved as an action item, it will be included in all proposed plans. Use the action item toggle to adjust whether the annuity purchase is included or excluded within each proposal. You can also click the action item name to make changes to the proposed annuity's information.

5
Repeat steps 1-4 as need to include multiple annuity purchases within the proposed financial plan and model the impact on the client's retirement.

If you use the Income strategy option to illustrate moving assets to a variable annuity, the annuity allocation will reflect the overall allocation of any variable annuities that you have entered in the client's Profile.  To reflect a separate investment allocation strategy (especially important if your client does not have any other variable annuities), use the Annuity allocation strategy.

See examples of ways to illustrate annuity strategies in a webinar that we presented - the recording is available on our webinar page.

For additional assistance leveraging annuity income strategies in RightCapital please contact Support.