Annuity FYI Blog

In the The New York Times, Mark Hulbert’s “Beyond the Longevity Tables” speaks about academic researchers recommendation of fixed annuities.  These researchers have long been fans of fixed life annuities which guarantee a specific yearly payout until the investor, or their spouse, passes away.  The article compares a 65-year old woman investing $100,000 in treasury securities for her life expectancy of 20 years.  If she lives longer than that life expectancy, which one in three women do, she will outlive her money.  But the same woman investing the same amount in a fixed life annuity would have a higher monthly return and would receive her payments for as long as she lives.

Investing in riskier assets has the potential for yielding higher returns but can, unfortunately, lead to significant losses as has been shown in the past year or two.  That is why the academic researchers and other experts have noted the benefits of fixed annuities for years.  The president of a financial planning firm in Florida believes that “there is no other real alternative to dealing with longevity risk.”  It is always important to shop around for the best fixed annuity rates and to use a reputable financial planner.

Conventional retirement wisdom has fallen by the wayside since the recent economic crisis so it’s time to rethink our planning, according to the AARP’s new tip sheet “Making Your Nest Egg Last a Lifetime.”  While retirees could previously safely withdraw 4% of their invested nest egg each year and rarely outlive their money, that has proven not to be case anymore as retirees have had to return to the workforce in droves.  The AARP’s tip sheet offers 5 pieces of advice to help you successfully retire and beat the longevity risk.

The AARP’s first tip is to postpone receiving Social Security as long as you can.  Wait past age 62 and at least until full retirement so that you have extra income that will last as long as you or your spouse lives.  Looking into buying an annuity is the second tip.  The AARP suggests that anyone with a retirement nest egg but not enough guaranteed income to cover their living expenses consider shopping around for the best annuities.  These can cover retirement living expenses with a fixed and guaranteed income stream.

Pay down your mortgage or pay it off entirely before retirement.  This third tip can dramatically reduce your fixed living expenses but not enough people take advantage of the opportunity.  The fourth piece of advice is to ensure that your assets are diversified and heavier in bonds as you age.  And the final tip is to be cautious about withdrawing your money.  Be mindful of your needs versus your wants and only withdraw more when you have improved returns.

In The Coloradoan, James Watt stresses the importance of choosing your annuity plans wisely in “Financial planning: Properly chosen annuities offer lifetime benefits.”  While it’s true that there are multiple facets to understand about annuities, unfortunately they are all too often misunderstood products.  When the annuity and the purchaser are matched properly, annuities can provide income over your lifetime.  Variable annuities have changed significantly over the past fifteen years and while they are more complex, they are much more useful and beneficial to the purchaser.

Their 4 more popular features are summarized here.  A guaranteed minimum income benefit offers lifetime income at a guaranteed rate.  With a minimum income withdrawal guarantee, the guaranteed minimum withdrawal benefit lasts for a predetermined fixed time period.  A guaranteed minimum accumulation benefit guarantees that you will receive the amount of your original investment at the very least, at some point in the future.  The advanced live delayed benefit delays the benefits you receive until an older age that is predetermined at purchase.

Annuities are great tools to cover the income gap: the amount of money to cover your needs in retirement versus the amount of money you will have coming in from social security or retirement plans.  401k annuities and other annuity purchases and rollovers can make the income gap nonexistent.  There are many tools available to estimate how long you will live and how much income you will need coming in throughout retirement.  Having a guaranteed income that protects against longevity risk without worrying about S & P 500 declines are the main benefits of an annuity.

As Liam E. McGee takes over as Hartford Financial Services Group, Inc.’s CEO, he has tough decisions to make to turn the company around.  The National Underwriter’s Trevor Thomas describes the challenges and McGee’s basic plans in “Hartford’s McGee: Annuities Still On Menu.”  With a $1.2 billion net loss for the first half of 2009 and federal bailout funds needed to survive, Hartford has been challenged to make better decisions and turn things around.  McGee is hopeful that he can do just that, after running a division of Bank of America that is larger than Hartford.

Variable annuities will remain a part of Hartford’s wealth management business even with a recent decline in VA sales.  Hartford has recently put plans into place meant to more appropriately handle the risk and reward balance relating to their annuity products.  McGee believes that new and innovative annuity products are a way to help Hartford overcome its recent financial troubles.  Without divulging specifics, McGee plans to improve the ways that his company allocates capital through competitive products with balanced risks and rewards.

VALIC just significantly raised the rate of their Assured Choice Annuity fixed annuity. The 7-year rate is currently 4.55%. Act now to lock in this great rate, which is likely available only for the next week, when VALIC reviews its rates again. Request an investor kit and complete information about this fixed annuity, or call 866-223-2121 to speak with an Annuity FYI Expert!