Customized Financial Strategies

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At Senior Financial Services we help our clients by designing a customized financial strategy that often combines more than one product. Each part of the strategy will often dovetail with the others to produce a comprehensive plan addressing asset protection and growth, income that meets or exceeds the client’s needs, efficient tax strategies as well as efficient methods of passing assets to your heirs. Contact Fred Orentlich at 800-679-2858
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Maximize Your Retirement with Senior Financial Services Inc - Annuities in Retirement Planning Part 2 (High Net Worth HNW people)

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At Senior Financial Services we don’t take shortcuts. Hard work and research are hallmarks of our practice.

For help with your retirement planning needs, contact Fred Orentlich of Senior Financial Services at 800-679-2858

 

Why HNW Individuals Consider Annuities

     Guaranteed Lifetime Income

  • Even with large portfolios, HNW retirees face longevity risk — living into their 90s or 100s.
  • Immediate or deferred lifetime annuities can act like a “private pension,” providing predictable cash flow, so investment assets can remain invested for growth.

     Tax Deferral

  • Contributions to non-qualified annuities grow tax-deferred.
  • For HNW individuals in high-income brackets, this defers taxes on investment gains, potentially reducing annual tax bills.

     Estate Planning & Wealth Transfer

  • Some annuities offer death benefit riders, guaranteeing heirs a portion of the principal or accrued value.
  • Can be structured to transfer wealth efficiently, especially when combined with trusts.

     Risk Management & Portfolio Protection

  • Variable or indexed annuities can provide market participation with downside protection through guarantees.
  • Reduces the need to sell volatile assets in a market downturn to cover living expenses.

    Types of Annuities Commonly Used by HNW Retirees

Type

Key Features

Typical HNW Use Case

Deferred Fixed or Immediate Lifetime Annuity

Guarantees income for life

Core stable income layer; hedges longevity risk

Variable Annuity with Guaranteed Lifetime Withdrawal Benefit (GLWB)

Market growth potential, guaranteed withdrawal floor

Supplemental income while keeping growth exposure

Indexed Annuity

Linked to S&P 500 or other indices, often with caps

Conservative growth with protection against market drops

Qualified Longevity Annuity Contract (QLAC)

Deferred annuity purchased within IRA/401(k) limits

Provides income late in life (age 85+), reduces RMD pressure

Note: HNW individuals often layer multiple annuities to match cash flow needs with market exposure.

    Strategic Advantages for HNW Retirees

     Reducing Sequence-of-Returns Risk

  • By locking in a guaranteed income floor, HNW retirees can avoid selling equities in market downturns, protecting portfolio longevity.

     Tax Planning

  • Deferring taxes in a high-income bracket can be powerful:
    • Non-qualified annuities grow tax-deferred.
    • Income only taxed when withdrawn, potentially when in a lower bracket.
  • Works well alongside Roth conversions or other tax-efficient strategies.

     Supplementing Social Security & Pensions

  • HNW retirees may have irregular cash flow needs from multiple investment sources.
  • Annuities can smooth retirement spending, making other portfolio allocations more flexible.

     Estate & Legacy Planning

  • Annuities with death benefit riders can protect heirs against market volatility.
  • Can also be used with irrevocable trusts for strategic wealth transfer.

    Considerations and Caveats for HNW Retirees

  1. Cost & Fees
    • GLWB or other riders can cost 1–2%+ annually, which can be significant for large balances.
    • High net worth clients need custom analysis to ensure benefits outweigh costs.
  2. Liquidity
    • Early withdrawals can trigger surrender charges, penalties, or loss of guarantees.
    • HNW retirees usually maintain a liquid core portfolio separate from annuities.
  3. Inflation Risk
    • Fixed payouts may lose purchasing power over decades.
    • Inflation-adjusted or indexed annuities mitigate this risk.
  4. Insurance Company Creditworthiness
    • Guarantees depend on the insurer’s financial health.
    • HNW individuals often diversify annuity providers or check AM Best ratings carefully.

    Positioning Annuities in a HNW Retirement Portfolio

Many advisors use a tiered approach:

Tier

Asset Type

Role

Core Income

Immediate fixed annuities / QLAC

Guaranteed lifetime income, covers essential expenses

Growth Layer

Equities, mutual funds, ETFs

Long-term growth and inflation hedge

Supplemental Income

Variable/indexed annuities with GLWB

Flexible withdrawals and downside protection

Liquidity & Flexibility

Cash, short-term bonds, taxable investments

Emergency funds, opportunistic spending
This approach reduces sequence-of-returns risk, provides peace of mind, and maximizes tax efficiency.
Location: Massachusetts, USA

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