How to Compare Annuities: A Step-by-Step Guide for Advisors
Why Comparing Annuities Can Be Challenging — Even for Experts
Advisors know better than anyone that comparing annuities isn’t straightforward. Each product comes with its own structure, fees, guarantees, optional riders, and payout strategies. These differences make it hard to apply a one-size-fits-all approach when clients ask you to compare annuity options.
Advisor forums are filled with frustrations over opaque tradeoffs, competing illustrations based on wildly different assumptions, and the absence of a standardized dataset. That’s why understanding how to compare annuities with objective, client-first tools is important.
The goal isn’t just to select a product — it’s to make a decision that aligns with your client’s retirement goals without resorting to sales-heavy tactics.
Step 1: Identify the Client’s Retirement Income Needs
Before you even begin to compare annuities, step back and evaluate the client’s long-term retirement income goals. Are they looking for guaranteed income? Growth potential? Liquidity for emergencies or tax efficiency?
Every annuity type serves different needs. And starting from the client’s strategy, not the product specs, keeps your process fiduciary-first. Income Lab’s annuity planning software reinforces this by initiating the process based on goals, not on default product attributes.
Step 2: Understand the Types of Annuities to Compare
Knowing how to compare annuity types means understanding what makes each one unique and how they align with client risk profiles. Let’s briefly explore three common categories:
Fixed Annuities
Best for conservative clients, fixed annuities offer predictable payouts and low risk. However, their annuity rates are often lower than other options, and inflation may erode purchasing power over time.
Fixed Indexed Annuities
These annuities are frequently misunderstood. While they’re seen as “safe with high upside,” returns are typically capped and tied to index performance with complex formulas. They’re good middle-ground products for clients wary of market volatility, but it’s important to compare annuity rates and caps carefully.
Variable Annuities
For growth-oriented clients with higher risk tolerance, variable annuities offer market-linked returns. But their fees, complexity, and income guarantees vary widely. When you compare annuity choices, it’s important to normalize these elements for a fair analysis.
Step 3: Normalize Return and Risk Assumptions Across Products
A core challenge in comparing annuities is that every illustration uses different return assumptions. Some rely on back-tested performance, while others use optimistic projections.
Applying consistent return scenarios — like those available in Income Lab — means you can fairly evaluate outcomes across all options. This step ensures that when you compare annuity rates, it’s done on equal footing, giving clients a clearer picture.
Step 4: Compare Fees, Surrender Schedules, and Riders
Annuity performance is about return, yes, but it’s also about what’s subtracted. When you compare annuity products, look closely at:
● Mortality and expense fees (M&E)
● Administrative costs
● Rider fees
● Surrender charges and withdrawal restrictions
Income Lab enables side-by-side comparisons of these fees over time, empowering advisors to help clients understand not just what they earn, but what they keep.
Step 5: Evaluate Income Outcomes Under Real Scenarios
Too often, clients are shown hypothetical growth scenarios without context. When you compare annuities, go deeper by modeling how each product performs in varying conditions.
Income Lab’s interactive interface allows advisors to stress-test assumptions and visualize how annuities meet income needs through various market environments
How Income Lab’s Annuity Planning Software Simplifies It All
Instead of juggling spreadsheets and product brochures, advisors can now compare annuity options with transparency and ease. Income Lab’s annuity planning platform simulates multiple products on one screen using standardized assumptions.
This not only improves client trust but allows for better education around complex tradeoffs, especially in fee-heavy or condition-based annuities. Unlike traditional calculators, Income Lab is interactive, scenario-based, and built for advisors who need planning tools — not sales tools.
Final Thoughts: Choosing the Right Annuity Is About Tradeoffs
Key Talking Points:
There’s no perfect annuity. The best choice depends on what your client values most: certainty, growth, flexibility, or liquidity. The ability to compare annuities effectively is what makes great advisors stand out.
Don’t rely on product pitches or assumptions. Rely on tools that make it easy to compare annuity rates, fees, outcomes, and more, so that clients can make confident, informed decisions.
See how Income Lab can help you turn complex annuity decisions into clear, data-driven conversations—schedule a demo today.
