There seems to be an endless parade of research and studies performed by the Insured Retirement Institute, Mathew Greenwald and Associates and others that find the public likes the features of annuities, but not the term itself. Mention the guarantees, riders, “upside participation and downside protection,” diversification options and everything else they offer, and consumers are all for it. But the high-fees, pricing mistakes, solvency issues and — quite frankly — poor marketing on the part of the industry has largely doomed the term with a negative connotation.

So how does an advisor or agent recommend an annuity that’s appropriate for their client’s situation without actually using the word? Believe it or not, by invoking Social Security.

Social Security allows for a discussion of the following:

• Needed monthly income
• Guaranteed income and how important Social Security is in covering non-discretionary spending
• Creating a longevity hedge so the client will not outlast their income

All three points are clear value propositions of Social Security — and annuities. By educating the clients about Social Security strategies, an advisor highlights the key benefits of annuities before ever having to mention the “A” word.

Pundits and politicians routinely use Social Security as a political football, but the overwhelming majority of Americans approve of the program, especially those receiving benefits. Put simply, Social Security is an annuity. The highly-rated insurer is the government, the recipient in the owner/annuitant and similar to annuities, beneficiary options are available in certain instances. Like a lifetime annuity, Social Security pays out guaranteed income for as long as a person lives.

A number of strategies can be implemented that combine Social Security and annuities. As I’ve mentioned in previous posts, creating a guaranteed floor of income with annuities to help cover non-discretionary expenses frees clients to be more aggressive elsewhere in the portfolio. Putting an annuity combo together with Social Security results in a floor of reinforced, high-quality hardwood as opposed to the cheap linoleum of some other strategy.

It’s for these reasons that I can confidently make the following statement with no hint of exaggeration — Social Security planning and its coordination with annuities is the biggest gift to advisors and agents in the past 30 years. This is only one aspect of why. Look to subsequent posts for more.

Ultimately, the perception of annuities should matter little to clients. If it is appropriate for their situation then it is appropriate for their situation — period. Social Security planning is a great way to illustrate that fact.