Annuity FYI Blog

Eighty-four percent of people with 401k plans would like to see information in their statements that isn’t currently there, according to “Key Data Missing from your 401(k) Statement” by Carla Fried of The Retirement Beat. People looking to retire would like to know how much monthly income they can receive from a 401k annuity transfer of their lump-sum balance.  Knowing the monthly income you can expect from your 401k’s lump sum helps you determine if you are financially ready for retirement.  Pre-retirees hope to withdraw 9-10% of their retirement each year to sustain their lifestyle.  But at that rate, most would run out of money in about a decade and be left for years or even decades struggling to get by.

In Washington, the government is aware of how substantial this problem is and they are working on making immediate annuities a required option with 401k plans.  No one would be forced into transferring to an immediate annuity, but the option for a lifetime stream of monthly income would be available to all 401k plan participants.  The biggest challenge right now seems to be educating 401k plan participants on the importance of immediate fixed annuities in retirement.  Many have antiquated negative ideas about annuities so the government and the financial industry have work to do educating pre-retirees on the benefits they can receive from a 401k annuity transfer.

New York Life Insurance Company issued a press release about their number one status with women purchasing annuities.  In “New York Life is Top Provider of Retirement Income for Women,” they reveal that they were the top seller of immediate fixed annuities to women last year.  Of their $1.9 billion in sales, women accounted for sixty-four percent of that.  That’s not really a surprise since New York Life was the first company to offer women life insurance at the same cost as men back in 1894.  Women know that New York Life is a strong and trusted company, so they often choose to secure their future with them.

Women can be at a greater risk of outliving their money than men because of their increased life expectancies and the loss of traditional pensions.  They used to be advised to invest in risky products so that they could make enough money to finance retirement, but these strategies proved dangerous and too risky.  Many women choose 401k annuities to purchase with retirement income that they have built up over their careers.  With lower cost and risk and no chance of outliving your annuity payments, women tend to find annuities as safe alternatives to other investment options.

In Prudential Financial, Inc.’s latest study, they found a large gap in retirement planning for Asian Americans.  Their press release, “Asian Americans Not Financially Ready for Retirement,” highlights the findings.  Not only have they not prepared enough with the purchase of immediate annuities and other retirement products, they don’t seem to be seeking any professional guidance in the matter.  Eighty percent of Asian Americans lost money in the recent economic downfall, both from investments and savings.  They still have very ambitious retirement goals, but there are large gaps between those goals and the retirement they’ll be able to achieve with their current savings and plans.  In the traditional belief system of the Asian culture, elderly are to be cared for by family members.  But of the Asian Americans surveyed, only one-third of them were banking on that family care.  About one-fifth of those surveyed planned to use government care like Social Security to fund their retirement.

There are many components missing from Asian Americans’ retirement plans, according to the survey “Asian Americans on the Road to Retirement.”  Less than thirty percent of those surveyed actually had a formal written plan for their retirement.  There was also not enough understanding or guidance related to life insurance and its importance for Asian families.  Not many of the survey participants knew the great value that an annuity, mutual fund, and other long term investments bring to retirees.  Ninety-eight percent of the survey participants know that a successful retirement depends on a good plan, but only eighteen percent have spoken about such a plan with a financial professional.  The Asian Americans surveyed have similar issues with the rest of Americans; Prudential recommends learning more about the financial products that can fix damaged portfolios and provide a secure retirement.

The Insured Retirement Institute (IRI), the non-profit organization promoting insured products like annuities, has introduced a retirement pyramid.  The pyramid aims to provide a secure retirement for its users by putting the largest amount of money into the largest or bottom tier and gradually decreasing the amounts as you climb the pyramid.  National Underwriter’s article “IRI Promotes Retirement Planning Pyramid” explains the strategy.  This week is the IRI’s National Retirement Planning Week of 2010, so they chose this time to promote the retirement pyramid.

This pyramid concept is meant for both consumers and professionals in the financial industry to use.  The three items making up the base of the pyramid are annuities, social security, and defined benefit pension income.  The second tier, called “long-term assets”, includes fixed annuity and other annuity income, 401k plans, real estate, and individual retirement accounts.  “Insurance” is the third tier encompassing Medicare, health insurance, life insurance, and long term care insurance.  The IRI’s top tier, “Investments”, is where they put stocks, bonds, mutual funds and certificates of deposit.

According to “John Hancock Annuities Adds E-Delivery Options to Award-Winning Website,” John Hancock Annuities’ electronic delivery options aim to help advisers more closely monitor their clients’ accounts.  The company’s website has already won awards for ‘Public Home Page Navigation’ and ‘Client Account Information’, among other things.  John Hancock Financial is one of the United States’ largest insurers, offering fixed and variable annuities, life insurance, mutual funds, long term care insurance, 401k plans, and other types of business insurance.  They are a unit of Manulife Financial Corporation out of Canada.

Since financial advisers are constantly looking for better ways to monitor their clients’ accounts to make any necessary changes, these new e-delivery options are regarded highly.  One of the options is “Email Alerts”, where advisers will get notification the day after financial transactions occur.  With “Recent Activity”, advisers can look at the most recent week’s business transactions.  They can be set up easily by financial advisers and can be customized by different types of transactions.  Payments, withdrawals, changes in fixed annuity rates, exchanges, and fees can be tracked online through John Hancock’s website.  These new e-delivery features help the financial industry move forward.