The Annuities and Insurance account feature in Riskalyze makes it incredibly easy for advisors to show clients how income products can help reduce the risk in a portfolio. Follow the steps below to add annuity products to a portfolio, set income scenarios, and see the impact of annuity payouts on Retirement Maps.
Want to see annuities in action? Click HERE to view a recording of our Using Annuities in Riskalyze webinar.
Create an Annuity Account
- Open the desired Client Portfolio
- Click Add Account
- Choose Annuity/Insurance as the account type
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Select the Company, Product, and desired Subaccounts. Choose specific subaccounts to include by toggling them on/off in the list.
Tip: If the desired annuity cannot be found, select Enter Custom to manually enter Company and Product information.
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Choose how to reflect risk for this account:
Use Income Stream - With this selection, the 'market risk' of the policy is on the shoulders of the insurance company.
Reflect Subaccount / Index Risk - With this selection, the 'market risk' of the policy is on the shoulders of the investor, via the cash value of the subaccounts. - Enter any additional details about the annuity contract. "Optional Fees" exposes additional configuration options such as income riders and death benefits.
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Select how to allocate the subaccounts. Skip this step if entering a custom annuity.
Success! You have just added an annuity to a client portfolio.
Annuity Settings
Once an annuity has been added to the client portfolio, the risk model and other settings can be updated as needed. Open "Settings" from the left-hand side of the account to toggle between Income Stream and Subaccount Risk modeling options, modify contract details, or add supplemental rider information.
Annuities in Retirement Maps
Annuities are incorporated into Retirement Maps as soon as they're added to a Portfolio. Annuities affect Retirement Maps in two different ways, depending on which option was selected for how to reflect risk.
Option 1: Use Income Stream
When you elect to have Riskalyze model living income benefit riders or annuitization benefits, the contract value (or benefit base), income start date, income withdrawal rate and any annual rider increases will be automatically incorporated into Retirement Maps. In this mode, the market risk is being offloaded onto the insurance company. Thus, the Risk Number of contracts in the "Use Income Stream" mode = nil. Retirement Maps takes the contract details entered into the "How does this annuity affect future income" inputs for Retirement Maps calculations. In the example below, you will see a few years of sideways expected principal value between the years 2030 and 2035. In this example, retirement started 5 years before the annuity income stream started.
Option 2: Reflect Subaccount/Index Risk
When you elect to have Riskalyze model the Subaccount / Index Risk, Riskalyze will use the actual price history of the allocated subaccounts/indices to identify the expected return and volatility. The calculated probable annual return and volatility will be incorporated into the Retirement Maps math. In this mode, the investor is carrying the market risk for this policy, and the underlying subaccount or index allocations will be fixed for the duration of the investor's life expectancy throughout Retirement Maps.
Using Fixed Annuities in a Riskalyze Portfolio
Equity Indexed and Fixed Indexed Annuities in Riskalyze
Modeling Pensions or Social Security Benefits
Ready to see annuities in action including best practices? Check out our annuities webinar below.