In this video, we’ll show you how to model a Fixed Indexed Annuity (FIA) using the US version of Voyant. You’ll learn how to incorporate an FIA into your client’s financial plan and clearly demonstrate its value, especially during a market downturn. See how this strategy can offer downside protection while still providing growth potential, helping you create more resilient plans for your clients.
Transcript
In today's training, I'm going to walk you through how to model a fixed indexed annuity in the Voyant software. I’ll also show you how you might use this as an example for your clients when demonstrating a potential buffer against major loss scenarios, giving them some additional fixed income during a market downturn.
We’ll start with a plan that doesn’t have an annuity product and is currently in a good position. Right now, our client is meeting all of their retirement goals. They have a brokerage account, Social Security, and a 401(k). Looking at their retirement section, we can see their current assets.
Next, we’ll model a market downturn. To do this, go to the plan settings and open the major loss section. These settings can be customized to fit whatever scenario you want to demonstrate. In this case, I’ll use a three-year major loss: a 15% downturn in the first year, 10% in the second, and 5% in the third. When you enter the fixed growth inputs, the software automatically fills out the allocation percentiles for the asset allocation growths, factoring in the account’s asset mix.
After saving these settings, I’ll drop the event into the plan so we can see the effect. I’ll add the major loss event from the plus button under events. By default, it occurs at age 65, but you can adjust it if needed. Saving this change, we can now see the plan’s probability of success drop from 100% to 83%. Looking at the dashboard, we see a projected shortfall starting at age 82.
Now, I want to show the client how moving some assets into a fixed indexed annuity might help reduce that shortfall. I’ll go to the What If section, create a new scenario called “Fixed Indexed Annuity,” and set it up under Retirement > Immediate/Deferred Annuity.
If the annuity already existed, I’d leave it as “In Payment,” but in this case, I’ll set it to “Future” and fund it with assets from the plan. I’ll give it a name, mark it as a pension type, indicate that it has a capital-protected element, and enter the value and 30 years certain. If there’s an escalation type, I’ll enter that as well, along with the beneficiary, fee rate, and assumed interest rate.
In the timing section, I’ll choose to have it start this year. Under payment sources, I’ll select the asset I want to use to fund it, then save the changes. Now, the annuity is part of the plan. In the details view, you’ll see the annuity in green, with an annual payment of $18,992, which helps boost expense fulfillment each year.
To compare the original plan to the one with the annuity, I’ll go to Compare Plans and select Chart View. Here we can see that, in the major loss scenario with the annuity, the shortfall at age 82 is reduced to $23,000, compared to $58,000 without it. That difference continues in the following years, with much smaller projected shortfalls in the annuity scenario.
This demonstrates to the client that while a major market downturn would still impact their plan, having the fixed indexed annuity could significantly reduce the long-term shortfall. They might need to adjust their spending slightly, but not as dramatically as in the plan without the fixed income product.
I hope this was helpful. If you have any questions, you can reach out to me at support@planwithvoyant.com or click your client’s name in the top right corner, request support, enter your question into the text box, and share client access.