Annuity FYI Visitor Blog

House Members Pomeroy and Brown-Waite Introduce “Retirement Security Needs Lifetime Pay Act” on June 8, 2009 | AALU Bulletin
The July issue of the AALU (Association for Advanced Life Underwriting) points out at House Resolution 2748 that proposes tax exclusions for lifetime annuity income payments, exemption of longevity insurance from required minimum distribution (RMD) system, and partial annuitization of deferred annuities. Introduced by Congresspersons Earl Pomeroy (D-ND) and Ginny Brown-Waite (R-FL), the bill cites the needs to allow the accumulation of sufficient assets for one’s retirement even in uncertain economic times. To view the bulletin, please click here.

Frustrations of a Variable Annuity Advocate | Moshe A. Milevsky, PhD., ResearchMag.com
A former critic of variable annuities Moshe A. Milevsky, PhD., of York University in Toronto proposes five ideas the insurance companies should implement to make annuities a more mainstream form of retirement financing. Among those steps, Milevsky suggests the industry should reconsider the position of annuities in one’s portfolio, introduce new types of variable annuities, and create a structure for spreading the risk. For a link to the complete article, please click here.

Long Derided, This Investment Now Looks Wise | Leslie Scism, The Wall Street Journal
If variable annuities used to be derided in the times of seemingly never-ending bull market, they now being increasingly accepted as an affordable and stable form of long-term investment, says Leslie Scism of The Wall Street Journal. With the recent stock market plunges, the sales of variable annuities have also taken a dive and forced the providers to offer some unprecedented conditions to new buyers. Coupled with guaranteed annual withdrawal and decreasing fees, variable annuities are becoming a product of choice for financing a comfortable retirement. For a link to the complete article, please click here

“A Summer Crop of Variable Annuities” in the Retirement Income Journal summarized this summer’s spectrum of variable annuity products.  Author Kerry Pechter stated that insurance companies are either reducing the cost of the product and making it much more simple or keeping the elaborate benefits and increasing the cost.  John Hancock and MetLife introduced simplified versions while Allianz Life and Genworth Financial’s new products are similar to traditional variable annuities.  As equity markets have rallied this summer from a DJIA of 6,700 points in March to 9,100 this week, this may be the time for some new products.

John Hancock Life’s AnnuityNote is one of the more straightforward products on the market.  There are one investment and one income option and only one inclusive cost.  With an S&P rating of AA+, John Hancock is aiming this product to the advisers that don’t normally recommend annuities, marketing AnnuityNote like “a mutual fund with a true guarantee.”  The Simple Solutions variable annuity from MetLife is also meant to be easily understood and lower cost than traditional VAs, while still offering good benefits.  It has a guaranteed lifetime withdrawal benefit (GLWB), one income option, four options for investments, and a short application that is only three pages.  The annuity rates of payout vary with age and investors have a choice of how they annuitize.

On the other side of the spectrum, the Vision variable annuity from Allianz Life has a complex prospectus and fees can be around 4%.  An Investment Protector and and Income Protector are the main riders offered with this product.  As you grow closer to receiving the income payments, the investments become more conservative, no matter which investments are chosen.  Their Vice President stresses that this new offering communicates what the company has learned in a tough market about product offerings and cost.  RetireReady One from Genworth also offers an Income Protector for its GLWB rider.  Speak with an expert about the details regarding any of these variable annuities.

The Insured Retirement Institute (IRI) has replaced NAVA as the consumer’s protector, according to “NAVA Gets Makeover” by Carrie Burns of Insurance Networking News.  With new employees and a new home in Washington D.C., the IRI plans to make sure that the insured retirement industry grows stronger.  They also want to ensure that investors in these guaranteed income annuities and other products are treated ethically and are well protected in the marketplace.

The IRI’s four main goals are to confirm that ethical practices are always followed in the industry, advocate for the understanding of the value of insured retirement options, safeguard “best practice standards” and “value delivery” within the industry, and to work with policy makers regarding retirement issues.

IRI’s Chairman of the Board of Directors, Mark Casady, stresses that this change is not simply a rebranding tool.  The company plans to change the direction of the insured retirement industry as a whole for their own members, financial advisers, and investors alike.  Their website is focused on providing information about annuities, other insured retirement products, and the retirement plan process.

A new lesson can be learned from the recent financial crisis: not even well-diversified portfolios can protect investors from taking substantial losses during a market meltdown. Tom Lauricella in his Wall Street Journal article describes how some popular hedging instruments such as foreign stocks are moving more closely in sync with the primary assets in a portfolio, thus losing their hedging nature.  Asset allocation, however, is not an outdated concept; for instance, inclusions of gold or Treasury Inflation Protected Securities (TIPS) can indeed mitigate the effects of falling markets.

Click here to request the full article. You can also see other interesting articles in our In The News section.

As stated in an article in the Latah Eagle, “Income annuities can help fill the retirement income gap.”  Many retirees will have a fixed stream of income from 401(k)’s, pensions, or promised Social Security payments.  Unfortunately, all too often these planned sources don’t cover retirees necessary expenses.  In order to bridge the disparity between the amount of retirement income you are set to receive and the amount you actually need, look towards an annuity.  Unlike savings or other investment options where you are unsure if they will last as long as you need them, an annuity can pay you for your entire lifetime.

By purchasing an annuity with an up front payment to an insurance company, you will receive payments at a predetermined start date that will last for the rest of your life.  Adding that to other retirement income can make for a comfortable future free of financial concerns.  You can even add a rider to your policy that will continue payments to your spouse throughout their lifetime.  Taxes are assessed depending on whether or not the money to purchase the annuity has already been taxed or not.  Be sure to check into all of the options available for your retirement to see if an annuity is right for you.