Annuity FYI Blog

As reported in Banking Business Review, “MetLife Launches (a) Lower-cost Variable Annuity.”  The product is called Simple Solutions and is geared towards retirees and those soon-to-be that are 60-80 years old.  Simple Solutions was introduced to meet two retirement concerns: “retirement income and safety considerations.”  MetLife meets these with a guaranteed lifetime income feature allowing up to a 6% (of the initial investment) withdrawal that will not lower no matter what happens in the markets.  This percentage is based on the age of the investor.

In order to reach more clients that may not have been aware of the benefits of a variable annuity, Simple Solutions is being made available at banks.  MetLife’s goal with this product is a straightforward variable annuity with uncomplicated terms that everyone can understand.  One income protection benefit, an easy and short application, and only four choices for investments to choose from make this one of the simplest variable annuities out there.  With great feedback from the banks so far, MetLife is confident that Simple Solutions will provide lifetime retirement income to many investors.

Variable annuities have been ridiculed in the past by many in the financial industry, according to Leslie Scism of the Wall Street Journal.  Scism’s article “Long Derided, This Investment Now Looks Wise”, says that variable annuities have proven to be an optimum investment during the recent stock market decline.  Variable annuities are a contract between an investor and an insurance company where an initial investment is paid out over time starting at some point in the future.  It is variable because the money is subject to stock market fluctuations.  Where they differ from typical stock market investments though is in the guarantee of money.  The additional fee for this guarantee was considered expensive by naysayers in the past, but has proven to be well worth the added fee in the long run.  Scism points out that while the S & P 500 fell almost 39% last year, the most generous variable annuities actually saw gains of around 6%.

Those great deals are hard to come by anymore as some insurance companies scrape to pay out their guarantees, but variable annuity guarantees are still much better than their alternative investments without the guarantee.  Investors need to be prepared for the fact that they cannot cash out a lump sum of their money with these investments.  Annuities are meant to be taken in payouts over time to cover your living expenses.  It is also crucial to invest with an insurance company that is solid and will be around to pay those monthly installments.

Variable annuities got a bad name 25 years ago when commissions for selling them were so high that it was questioned whether the suitability for investors was looked into well enough and if the fees were too high for the investment.  Researchers have found recently though that some insurance companies are actually charging less than they could and with all the benefits, those negative aspects from decades ago have changed.  Although products may currently have less to offer, they are still offering great guarantees.  AXA Equitable offers a 5% increase to the income base annually, as does Ohio National Life Insurance Company.  Compare annuities with an expert and see what a variable annuity can do for you as you approach retirement.

David Adler is the author of “Snap Judgement; When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Money Mistakes”.  A summary on Marketwire says that the best way to climb back up to the top of your financial game after this crisis is to be skeptical of your first impressions.  Although those judgements work in most other areas of life, it is crucial to research and go into deeper thought when dealing with finances.  Adler believes that much of the country’s financial crisis was based on snap judgements by large financial institutions and going with so-called “best practices” instead of thinking decisions through.

The following are the “traps” that Adler urges you to avoid in order to get your finances in order.  He urges consumers not to avoid annuities due to the perceived costs because they can “fund a level of eternal consumption”.  Although it might seem logical to maintain fallen stocks or mutual funds until they rise, “losing stocks generally continue to lose.”  Stock analysts’ choices for the best stocks to buy and sell are usually old news by the time you see them and will no longer be beneficial to you.  He says not to assume that your broker is speaking in the terms you are thinking: make sure that all conversations are in after-tax amounts.  Don’t just follow the court of public opinion regarding how the market is doing; they aren’t always right.  Adler’s advice is simply to think twice before making rapid financial decisions because it is one area in life where first impressions just may not be wise for you.

On January 1, 2010, a new law will make annuity and life insurance distributions tax-free if they are used for the cost of a nursing home.  Robert Powell of Fox Business online wrote about this in “New Products May Ease Bite of Long-term-care Costs.”  In anticipation of this law, insurance companies have created hybrid products that mesh annuity and life insurance products and long-term-care insurance.  United of Omaha, Genworth Life, Bankers Life, and OneAmerica are leading the charge with many other products expected to emerge later this year.

Although all of the products are different, they share the following main points.  A fixed deferred annuity is purchased with non-qualified money.  There is a long-term-care rider attached to the annuity which releases funds two or three times the beginning investment, for a certain number of years, or for the recipient’s lifetime.  These hybrids can possibly lower the burden of long-term-care costs significantly, but they have their own fees associated with them.  You should thoroughly consider an expert’s advice and weigh the pros and cons of any annuity before making a purchase, especially a new hybrid product.

MassMutual tied for The Best in Class Call Center award (for under 200 staff) from the International Quality and Productivity Center(IQPC) for the second year in a row.  According to a press release from PRNewswire, MassMutual’s Retirement Services Division’s Call Center and Debbie Cote, who is in charge of the center, received top awards for their excellent customer service.  The IQPC established the Call Center Excellence Awards to honor the industry’s best.

Whole life insurance is the foundation of MassMutual, which also provides customers annuities, retirement and 401(k) services, and other types of insurance.  They pride themselves on quality, personalized assistance and top notch services for their customers’ retirement needs.

The IQPC award was based on employees working together to successfully care for their customers, how they manage in a difficult economic climate, and the team’s motivation and togetherness.  In addition to this award, MassMutual won a handful of other customer service awards in the past few months.  Their professional staff focuses on finding solutions to customers’ retirement needs through education and conflict resolution.