Date posted: November 28, 2014
The Treasury Department made waves earlier this year with their ruling regarding the use of annuities in 401k and other retirement plans. Investment News’ Darla Mercado researched how best to implement this annuity strategy in her article “Now that annuities are OK in retirement plans, what strategy is best?“ This past July, the Treasury Department made it easier for Americans to use deferred income annuities within retirement plans. These qualified longevity annuity contracts guarantee income payments later in life after a lump sum purchase in the present day. Last month, the Treasury Department started allowing deferred income annuities to be used instead of target date funds.
While these federal rulings are very important for the annuity industry and the general public, there is still the issue of how to allocate your funds to annuities within your retirement plan. Financial advisors, employers and retirement plan sponsors have some work to do to figure out the details regarding the use of annuities in 401k plans. First, they need to determine what percent of retirement savings should be used for annuities and then they have to determine how the remaining money should be invested.
Morningstar Investment Managements’ David Blanchett recently wrote a paper about how to allocate a deferred income annuity in a defined contribution plan. He said that advisors have to talk to plan sponsors about adding annuities to their defined contribution plan choices if they are not already there. They also have to discuss the best types of annuities to use and how to use them. In their research, Morningstar analyzed close to 80,000 different financial scenarios. They determined that most consumers are best suited allocating 30% of their retirement funds to deferred income annuities. Morningstar researched purchase ages of 50, 55, 60 & 65. They expected all of these people to retire within 15 years of purchasing their annuity.
There were 10 different factors used when determining the results of this study. Some of the factors included the current age, the retirement age, how much has been saved for retirement, life expectancy, glide paths and whether or not the individual wants to pass on money to their heirs. Using annuities in retirement plans changes how your other money is allocated as well. The equity allocations for target date funds can be raised because of the guaranteed income that annuities provide. This income may also change the way that workers claim their Social Security benefits, including the age at which they choose to do so. Consider your specific retirement goals and work closely with a knowledgeable advisor to best utilize annuities within your retirement plan.
Date posted: November 25, 2014
If you are worried about leaving money to your heirs when your life ends, Symetra Life Insurance Company has an enhanced death benefit rider that you might want to consider. In the Marketwatch company press release, “Symetra Adds Enhanced Death Benefit Rider to Fixed Indexed Annuity Suite,” the company introduces their newly released optional death benefit. This rider can be added to some of their fixed indexed annuities, including the popular Symetra Edge Pro. This enhanced death benefit feature offers customers the ability to leave a larger death benefit to their beneficiaries than they are able to with other annuity products.
This new feature is good for clients who are more concerned with how much money they leave to their heirs than they are with having a higher income payment for themselves. They still seek the safety that a fixed indexed annuity brings, but are not trying to maximize their personal use of the annuity’s value. Although these clients may not anticipate a great need for their annuity income now, they realize that they might need this income in the future so they want to maintain access to their money rather than simply purchasing a life insurance policy. Clients can still plan to leave a legacy with Symetra’s new death benefit rider, but maintain the option to use their fixed indexed annuity for income should they need it in the future. You also don’t have to take medical tests to offer death benefits through an annuity like you do with life insurance policies. Annuities certainly do not negate the importance of life insurance, but they are an added benefit.
Here are some of the details related to this new death benefit rider. There is not an extended waiting period for Symetra’s enhanced death benefit rider. You are charged at the end of the first interest term for your rider, which activates the benefit. Beneficiaries will receive a full lump sum benefit, rather than having to annuitize their inheritance like they do with some other death benefits. This death benefit rider can be issued when the annuity purchaser is between the ages of 0 and 75. This benefit includes a rollup period of 10 years with an annual rollup percentage of 7% simple interest. Your fee is .90% of the amount of your death benefit.
Symetra’s Edge Pro fixed indexed annuity is sold through banks and broker dealers. It helps to meet consumers’ retirement planning needs with principal protection and diversification of investments. There are two different indexing options from which to choose and each of those has two interest crediting choices. This fixed indexed annuity has a fixed account option and a guaranteed minimum value benefit. There are 5 and 7 year surrender periods that have 4 different no-cost options for taking out money. Symetra’s new enhanced death benefit rider for their fixed indexed annuities targets a specific group of consumers. If you are looking for the benefits offered by this new option, speak with an expert at Annuity FYI to help answer your annuity questions.
Date posted: November 24, 2014
It’s really the responsibility of the annuity industry to proactively spread information about annuity products. There is a lot of negative information in the public, some of it warranted, some of it not. Naysayers say that annuities cost too much, are complicated and lack flexibility if your needs change. This is not the case for most annuity products, but unless the annuity industry works to educate the public on annuity truths, they will continue to hear the negative people loudly. The National Association for Fixed Annuities’ President and CEO Kim O’Brien is calling for the fixed annuity industry to go on the offensive and distribute accurate annuity information to the public. This information comes from Insurance News Net’s “Fixed Annuities Must Tell A Simple Story,” by Cyril Tuohy.
Annuities offer value far beyond their current interest rate, so that is one of the first pieces of information that NAFA hopes to spread. They stress that full disclosure is crucial and certainly don’t want anyone to think that annuities are perfect and work right in every plan. The annuity industry simply wants consumers to consider annuity products and see what they have to offer and if they will be a useful product for their own financial plan. Back when defined benefit plans paid all workers lifetime monthly income, annuities were not well known. Now that most people don’t have this benefit at work and Baby Boomers are retiring in droves, annuity products that pay the same type of lifetime monthly income are more important than ever.
One of the first steps in spreading annuity education was the nonprofit organization, the Society for Annuity Facts & Education (SAFE), declaring last June Annuity Awareness Month. Many different financial organizations sponsored this annuity awareness campaign, including NAFA. There have been a lot of national annuity stories this year as well. The Treasury Department ruling regarding Qualified Longevity Annuity Contracts has increased talk about using annuities in retirement plans. State regulators have been working hard to ensure that advertisements are not misleading. Lawmakers have been talking about annuities related to the Security Throughout Retirement Act as well. Each time that annuities are discussed on the state or federal level, it brings awareness to their importance as a financial tool.
NAFA works to educate consumers and advisors, but they are also working more recently with experts as well. Sometimes people listen to an “expert” opinion without really looking any further into it. NAFA questioned one expert who said that no one should buy fixed annuities because of the current low interest rate environment. Annuities are not specifically designed to be interest-rate tools. Most people who own annuities have them for their retirement savings and principal protection. Fixed annuities protect your principal, guarantee income and provide you peace of mind during retirement. Interest rates should not always be the reason to buy a fixed annuity product. Higher fixed annuity rates are a bonus, but any interest received is in addition to the benefits for which you are already purchasing a fixed annuity most often.
O’Brien says that the story about fixed annuities must be kept simple. They don’t have all of the moving parts of variable or indexed annuities and their simplicity is one of their innate benefits. They are an insurance product meant to offer protection, specifically protection of your money and the risk that you will outlive it. Protection and guaranteed income are two of the financial guarantees in the most demand. Fixed annuity sales figures are at their highest level in five years. Second quarter sales were up more than 40% from last year. Fixed annuities offer many valuable benefits that have nothing to do with their earned interest. It’s important for the annuity industry to spread education that expresses the true benefits of annuity products.
Date posted: November 21, 2014
Third quarter indexed annuity sales results have just been released by Wink, Inc. In a press release for Insurance News Net, the said that “YTD Indexed Annuity Sales (were) Greater Than Any Year But 2013.” Wink’s Sales & Market Report represents the sales figures from 47 indexed annuity carriers, or 99.8% of the market. Indexed annuity sales were $11.4 billion, a 14.28% increase from the third quarter of last year. This year’s third quarter sales were down 8.58% from the second quarter. But the year to date indexed annuity sales figures are strong. They are at the highest level ever, with the exception of a record-setting 2013. Sheryl J. Moore of Moore Market Intelligence and Wink, Inc. believes that indexed annuities are likely to sell more than $45 billion this year.
Allianz Life remained the top seller of indexed annuities during the third quarter. They maintained a market share of 26.80%. The Allianz 222 indexed annuity was the best selling indexed annuity product during the third quarter. American Equity had the second highest sales and Security Benefit Life the third highest. The fourth and fifth top sellers were Great American Insurance Group and Athene USA. The article also summarized the indexed life sales for the third quarter. With an increasing number of companies entering the indexed life sales market, they saw a sales increase from both last year’s figures and from the second to the third quarter. Pacific Life held the top spot for sales with 11.61% of the market share. Aegon, National Life Group, Minnesota Life and Zurich American Life held spots 2-5. The top selling indexed life product was Western Reserve Life’s WRL Financial Foundation product.
Indexed annuity and indexed life products offer unique solutions to financial planning needs. Strong sales figures show that consumers appreciate the value and benefits of indexed products. Indexed annuities offer principal protection along with the potential of market gains and a wealth of other benefits. While they are not the right annuity for everyone, their strong sales figures show that they are worth consideration when creating an income stream for your retirement. Speak with an expert at Annuity FYI if you have any questions about indexed annuity products.
Date posted: November 20, 2014
Annuities are best used to fill gaps between other investments, according to Karen Demasters of Financial Advisor Magazine. In the article, “Annuities Can Fill Investing Gaps, Advisors Say,” she stresses the importance of advisors being educated about the value of annuity products. Most consumers are confused about all of the different kinds of annuities and the benefits that they have to offer, so it’s crucial for advisors to know what products are out there and how they might be able to help their clients. This is especially important because sales of annuities have been steadily increasing, as have the number of products out there. The Insured Retirement Institute reported a nearly 10% increase in annuity sales between the second quarter of 2013 and the second quarter of 2014.
New annuity products are introduced into the marketplace on a regular basis. So even though some insurance companies have decided to stop selling annuities, the number of new products appears to mitigate the impact of those lost. One financial advisor said that he has seen ten new annuity products introduced in the past few months. The Essential Income 7 is Allianz Life’s newest fixed income annuity product. You can add the Essential Income Benefit, which creates a lifetime income stream for an added cost. Annuity products also offer a variety of other riders that can be added for an additional cost. You can get guaranteed lifetime income, long term care insurance and death benefits to name a few.
Confusion can arise because of the different costs and regulations associated with different annuities. Advisors must be well-versed so that they can give the correct information to consumers. Insurance companies follow suitability guidelines and work with advisors and consumers to ensure that financial goals are met. One important benefit of annuities that isn’t always front and center is that they free up the rest of your money for more aggressive investing. When you purchase an annuity that guarantees income for life, you can aggressively invest your other savings in the hopes that that money will see large returns.
First, consider every source of income that you will receive during retirement. Use annuities to fill the income gaps between what you’ll be receiving and what you expect your expenses to be. While you don’t want to invest your entire retirement savings into annuities, they are important for their income guarantees. It’s one of the only ways to protect your principal and receive guaranteed income. There are advisors who don’t know that annuities offer full principal protection, so that’s an important piece of information to get out there. The money that you have in an annuity is also protected from creditors in some states. There are state guarantees for annuity products of differing amounts as well. If annuity information starts with the insurance companies and trickles down in an accurate way to consumers, most people could benefit from the options available in their financial planning.