Date posted: December 31, 2010
While more Americans than ever are depending on Social Security to fund their retirement, most of those recently surveyed don’t think that the money they receive will be enough to live on. The study was performed by Hartford Financial and could mean big business for their annuity sales. Annuity News Journal’s article “Social Security Becoming More Important” by Errol Baddoo highlights the results of Hartford’s survey. Forty percent of those surveyed think that Social Security will be their most important source of retirement income, but eighty-five percent of people don’t think that Social Security will cover all of their living expenses. This discrepancy means that Americans need another way to finance their retirement to supplement Social Security payments. Hartford Financial and other insurers hope that annuity products will be that bridge.
Seventy-five percent of those surveyed think that it is their own responsibility to plan for their retirement and are not expecting the government to carry them through. Purchasing an immediate annuity with savings, 401k, or other funds can help cover basic living expenses in retirement. Hartford and other insurers have options for fixed annuities, variable annuities, indexed annuity products and others that allow investors many options with low risk. The recent decline in the economy has made Social Security even less attractive because of tremendous losses. Annuity products are expected to have a large increase in sales going forward as investors look for products with both lower risk and better guarantees. Decreases in annuity sales in 2008 and 2009 have already led to increasing sales in 2010.
Date posted: December 30, 2010
According to Barron’s, variable annuities are getting a slight facelift. In Murray Coleman’s article “Variable Annuity To Open Next Week Offering ETFs as Investment Options,” a new type of product is emerging. Insurance companies selling variable annuities typically invest in mutual funds, but the first ETF-based variable annuities will be sold next week, according to Dow Jones Newswires.
Varoom, the Variable Annuity for Roll Over Only Money, allows investors to create their own personalized portfolio containing subaccounts investing in only ETFs. Two companies that are part of Western and Southern Financial Group in Cincinnati created Varoom. Integrity Life Insurance and National Integrity Life Insurance will offer investors eighteen different ETFs from which to choose. They are from Vanguard and BlackRock’s iShares unit.
These products are unique from equity indexed annuities and even other variable annuities on the market. The direct investment in the ETF subaccounts is the big change from previous products. Lincoln FInancial Group’s SSgA Global Tactical Allocation Fund is one example of this kind of fund-of-funds approach. The success of these new variable annuities should determine how many other insurance companies take on such a product.
Date posted: December 29, 2010
Advisor One’s Moshe A. Milevsky sings the praises of Transamerica’s Principium II variable annuity in the article “Transamerica Principium II.” The annuity is rated an 8 out of 10 stars because investors have choices regarding their insurance and investment options and their cost is based on those choices. The author believes that Transamerica is one of the few companies offering true guaranteed lifetime withdrawal benefits (GLWB) that truly protect against longevity risk, inflation, and sequence of return.
While the death benefit annuity only pays out the policy value, you pay much lower fees by not having a guaranteed minimum death benefit (GMDB). For those who would like more of a guarantee, they can pay extra for a return of premium or annual step-up option, but the option is not forced upon you.
Those opting for the living benefit rider, called the “Retirement Income Choice 1.2 rider,” are guaranteed at least a 5% increase for the first 10 years. During that time, if your “monthiversary,” or average monthly statement value, is higher than the 5% gain, you will get that increase. After the 10 years, your increase will be equal to your highest “monthiversary” value for the year.
During the income stage, you can withdraw 4% at age 59, 5% at age 65, and 6% at age 75. The numbers decline by .5% if you opt for the joint life option. For the subaccount investments, there are many Vanguard-based exchange-traded funds to choose from. The author believes that these are some of the best annuities for investors. The fees charged for the Principium II are based on the risk taken on by Transamerica for the options chosen by individual investors. This annuity could be a good variable annuity for you to check out.
Date posted: December 28, 2010
While we may all be excited at the prospect of living a longer life, insurance companies and others selling immediate annuities have to worry about increasing life expectancies. The Hargreaves Lansdown article “Live long and prosper” by Ruth Richards discusses the effects of increasing life expectancies on annuity products. While many people around the world make New Years resolutions to lose weight, get their finances under control, or get organized, insurance companies make somewhat of a resolution as well. At the beginning of each year they have to reevaluate their annuities and determine if any changes need to be made.
They will look at mortality rates and any increases in life expectancy predictions so that they can adjust their product offerings accordingly. As people live longer, insurance companies will make more payments to those holding annuities. Fixed annuity rates and other offerings may be reduced to keep up with the demand of making payments to those already holding annuity products. While those selling annuities are reevaluating in the New Year, it is also a great time for investors to reevaluate as well. Make sure that your own finances are in order so that you can retire and live comfortably when the time comes. An annuity offers lifetime payments so the longer you live, the longer you receive your payments. Now may be the time to make a 401k annuity transfer and use that money to pay your basic living expenses over your lifetime.
Date posted: December 27, 2010
Naming a beneficiary for your annuities, life insurance, IRA, and retirement plans can even trump what is designated in your will or trust. According to John Bullis’ Nevada Appeal article “Beneficiary designation takes precedence over will, trust,” you should reevaluate your beneficiaries every two years to make sure that a death, marriage, divorce, birth or other life event has not changed your beneficiary desires. It is also wise to ensure that you have a designation form from the holder of your annuity, life insurance policy, etc. to keep with your will and/or trust. If you don’t already have the beneficiary designation forms, it is simple to get them from your insurer or advisor.
It is a good idea to name a contingent or secondary beneficiary to receive your death benefits in addition to a primary beneficiary. In the event that your primary beneficiary passes away or does not want to inherit anything because of taxes or a lifestyle situation, the secondary named beneficiary will receive the inheritance. Surprisingly, there are people that do not need or want to receive benefits whether it be from annuities, life insurance, retirement plans, or an IRA. There is no better time than now to double check your beneficiaries and make sure they are who you want them to be. A beneficiary designation overrides will and trust designations, so it is crucial to stay up to date with your information.