Beyond income: How today’s annuities can unlock growth and stability

July 18, 2025

Estimated reading time: 4 minutes

• While annuities were once seen primarily as income products, today’s fee-based annuities give RIAs access to a broad toolkit that can support clients across a range of financial goals and risk profiles.

• These products can help clients pursue income, growth, or both. This article outlines practical use cases to help advisors match each product to the right client need.

• Working with an outsourced insurance desk partner, advisors can evaluate client financial objectives, facilitate identification of the best-fit annuity, and offer access to a streamlined, digital-first experience throughout the annuity purchase process.

In the first two articles of The Annuities Opportunity series, we examined the evolution of annuities and how industry innovations have made these products more appealing to fiduciary advisors and their clients.
 
Today’s annuities go far beyond the traditional income-oriented products of the past. With a variety of options designed for growth, income, or both, they can help clients accomplish a broad range of objectives. Through an outsourced insurance desk (OID) partner, like Flourish Annuities,^∫ advisors can access specialized guidance from licensed insurance experts, assist with access to the best-fit solution for each client, and deliver a seamless, tech-enabled process from start to finish.

What exactly do these new fee-based annuities offer, and which clients are they best suited for? In this section, we’ll explore the product types available through Flourish Annuities along with common use cases for each.

For clients seeking an alternative to traditional fixed income products, MYGAs offer a compelling option. They provide a fixed rate of guaranteed growth over the term of the contract, along with full principal protection.††
 
The benefits don’t end there. Any interest earned on a MYGA is not taxed until withdrawal, which makes it an appealing vehicle for tax-deferred growth.^{^^‡‡} 

Role in the portfolio

• Fixed income ladders: MYGAs often offer higher rates than comparable fixed income alternatives, such as brokered CDs, Treasurys, bonds, and more. This has resulted in advisors and clients increasingly using MYGAs as part of their bond laddering strategy.¹
• Bucketing strategies: Advisors that employ bucketing methods may wish to consider MYGAs for some of their short-term buckets, given the combination of attractive rates, a defined term, and complete downside protection that can be matched with shorter-term, defined liability needs.

We have found that MYGAs are typically best suited for clients who:

• Are in or nearing retirement. MYGA terms typically range from 2 to 7 years with guaranteed principal protection.^†† This structure can help mitigate sequence of return risk for clients who are on the precipice of their retirement years, which may offer greater confidence when it matters most.
• Hold an existing annuity that no longer serves their goals. Clients who purchased annuities from commissioned sales reps may be paying higher fees for underperforming products. Annual fees across commission-based fixed and variable annuities often range from 0.6% to >3%, making it essential to assess each client’s contract.² Replacing an outdated annuity (known as a 1035 exchange) with a more efficient MYGA can improve performance and may help the client avoid unnecessary surrender charges or tax penalties.
• Are risk averse with cash on the sidelines who are sensitive to portfolio drawdowns. No one enjoys market volatility, but some clients react with increased stress or anxiety. For these individuals, a MYGA can provide enhanced certainty and higher return potential beyond other traditional fixed-income products.
• Seek tax-efficient growth. For clients nearing retirement who expect their income to decrease, a MYGA may allow them to defer taxes until they are in a lower tax bracket. Similarly, MYGAs can serve high-income clients looking for creative ways to maximize tax-deferred growth beyond traditional retirement accounts.^{^^‡‡}

FIAs are moderately conservative annuities that offer tax-deferred growth linked to a market index, such as the S&P 500, which determines the interest credited to the annuity account.^{††^^} The FIA’s returns are capped in exchange for complete downside protection, which provides clients access to stable, risk-managed growth.

Role in the portfolio

• Equity replacement: Clients nearing retirement who are highly concerned about sequence of return risk typically shift funds from equities to fixed income products — or potentially worse, from equities to cash. Alternatively, clients and advisors can consider shifting equity positions into FIAs, which maintain some upside potential while providing complete downside protection that can ease client concerns.
• Fixed income replacement: Some clients may feel that traditional fixed income products don't deliver enough benefits, but are still hesitant to take on the volatility of equities. An FIA can provide an attractive middle ground, providing market-linked growth without downside risk.

We have found that FIAs are typically best suited for clients who:

• Want more upside potential without the downside risk. Clients in or nearing retirement are often looking for a happy medium. They want better growth potential than a MYGA, but still want to be shielded from losses. FIAs strike that balance, making them appealing for investors who wish to mitigate sequence of return risk while remaining invested — and for advisors who have clients who struggle to take the risks necessary to meet their goals, and need all the “equity-like” upside they can get.
• Hold too much cash on the sidelines. Flourish data and surveys show that high-net-worth clients often hold more than 20% of their assets in cash.^|| FIAs can offer a compelling alternative: a zero-downside, equity-like position that can outperform traditional savings while preserving principal — and for advisors, a way to help clients get cash off the sidelines and increase the expected value of their investments while getting funds into a fee-earning portfolio.
• Are risk averse and have strong, negative reactions to portfolio drawdowns. For clients who are willing to limit returns in favor of complete downside protection, FIAs offer capped growth potential linked to a market index and full principal protection. FIAs are suited for clients seeking greater returns than a MYGA or other fixed income options, while still mitigating sequence of return risk. Additionally, the contract will not decrease in value unless funds are withdrawn early.^‡‡
• Seek additional tax optimization. Clients in a higher tax bracket may be looking for further opportunities for tax optimization through more conservative strategies. Earnings from FIAs are tax deferred, until a time when the client may be in a lower tax bracket.

RILAs offer tax-deferred growth tied to a market index, similar to FIAs, with gains and losses based on index performance.^{††^^} The key difference, however, is that a RILA typically offers only partial, defined downside protection in exchange for a higher capped rate on any returns — though a few products now offer full protection.
 
This added exposure makes RILAs a more aggressive option than MYGAs or FIAs. 

Role in the portfolio

• Equity replacement: Clients and advisors may wish to shift portions of their equity holdings to RILAs as they near retirement, maintaining significant upside potential while mitigating sequence of return risk and increasing client retirement confidence.
• Complement buffered ETFs or structured ETFs. Clients exploring buffered or structured ETFs will find that RILAs share many of the same characteristics — namely, downside protection and capped gains — but with the added benefit of tax-deferred growth.

We have found that RILAs are typically best suited for clients who:

• Aim to reduce downside risk as they near or enter retirement. These clients may be looking to shift out of equities but still want growth potential. RILAs can be an effective replacement, offering continued equity exposure paired with built-in, defined downside buffers to help ease the transition out of their earning years.
• Are risk-averse and hold cash on the sidelines. Some clients hold very conservative positions to avoid losses, which then risks so little growth that they miss their financial targets. Encouraging these clients to move some holdings from cash or fixed income products into a RILA can balance greater growth potential with the stability that comes with defined downside protection.
• Currently are falling short of their financial goals. RILAs offer equity exposure and can be a good fit for clients who want to maintain significant upside potential. RILAs present an opportunity for high growth potential while providing defined market loss protection. Although interest is not guaranteed and there is the potential for principal loss, exposure can be reduced or limited through a buffer or floor to ease concerns during market downturns.
• Seek tax-deferred growth opportunities. RILA earnings are fully tax deferred until funds are withdrawn, when clients may be in a lower tax bracket. For additional tax deferral, funds in a RILA can be rolled into a new contract through a replacement.^{^^} 

IOVAs offer clients broad investment flexibility and the potential for uncapped, tax-deferred growth across a wide range of asset classes.^{††^^} While they carry the risk of principal loss, they can be a strong fit for growth-oriented investors with higher risk tolerance who are looking to optimize for tax efficiency.

Role in the portfolio

• Seek additional tax-deferred growth opportunities. For clients who have already maxed out other tax-advantaged accounts, IOVAs offer another way to defer taxes on investment gains. With access to a wide range of subaccounts and asset classes, they provide both flexibility and long-term planning advantages.^{^^}

We have found that IOVAs are typically best suited for clients who:

• Want a replacement for a high-fee legacy annuity. Clients who carry outdated variable annuities may be paying high annual fees. Variable annuities subtract a rate spread on years they earn interest, and they have an annual expense ratio that can range from 0.6 to over 3.0% each year.²  These clients may find an IOVA to be a suitable alternative and can save 0.5 to 1.0% in fees each year.
• Have a variety of estate-planning considerations. IOVAs offer flexibility in transferring wealth to heirs, including the ability to bypass probate or route proceeds through a trust for structured, tax-efficient distribution.^{^^} For clients concerned about their heirs’ financial responsibility, IOVAs can be set up to dictate the structure of distribution, preventing lump sum spending. In this way, these products can support effective multigenerational planning.
• Are uninsurable, but want to leave a legacy. If your client cannot access life insurance, a non-qualified annuity like an IOVA can offer an alternative path to providing for beneficiaries, with the added benefits of tax deferral and flexible distribution options.
• Seek equity exposure with tax-deferred growth. IOVAs offer market exposure for clients looking for aggressive growth potential within a tax-deferred wrapper. Ideal for clients who have reached the limits of their tax-advantaged accounts and who may be in a lower tax bracket during retirement.^{^^}

Historically, annuities have been thought of primarily as a source of income. Through products like a single premium immediate annuity (SPIA) or deferred income annuity (DIA), your client hands a lump sum to an insurance carrier and, in exchange, receives regular payments for the agreed-upon term. However, the loss of access to the funds can be challenging and unsettling for clients, particularly if their needs or life circumstances change.

Modern fee-based annuities are different: they are primarily growth-focused products. However, the addition of a guaranteed lifetime withdrawal benefit (GLWB) rider can provide your clients with the same “paycheck for life” they would enjoy with a traditional income annuity, while avoiding some of the common drawbacks.

Consider a client who purchases a MYGA with a GLWB rider. When they do so, they retain control of the asset — unlike with a SPIA, where they lose access to their initial lump sum payment.

Withdrawal rates are competitive against SPIAs³ and remain in effect for the client’s entire lifetime. If there is any remaining cash value in the contract at the client’s time of death, it can be passed on to beneficiaries. For married clients, they can opt for a joint payout structure within their MYGA with a GLWB to ensure that the contract continues to make payments for the life of both the covered spouses.

Additional annuity features to know

As you guide clients through their annuity options, it’s important to be familiar with key contract terms and product features that vary by carrier. These details can influence both performance and fit. Visit our Annuities Glossary for a full overview of key concepts.

Annuities can be complex, but offering a range of modern solutions for income and growth sets your firm apart. It shows clients you have the flexibility and creativity to solve problems and customize their financial plan to better meet their needs.

With an OID partner like Flourish Annuities, you don’t have to navigate the landscape alone. Our team of Annuity Specialists is here to support portfolio reviews, identify potential solutions, and deliver a seamless, digital-first solution from start to finish.

In the final article of the series, we’ll explore how to get started with Flourish Annuities and successfully give clients access to new portfolio solutions. You’ll learn how to train your team, connect your tech stack, and provide access to an annuity offering that enhances client satisfaction while helping grow your business.

About Flourish

Flourish builds technology that empowers financial advisors, improves financial lives and retirement outcomes, and delivers new and innovative investment options to advisors. Today, the Flourish platform is used by more than 1,000 wealth management firms representing more than $2.6 trillion in assets under management. Flourish is wholly-owned by MassMutual. For more information, visit www.flourish.com.