Date posted: May 31, 2011
Nationwide Financial’s IncomeInsight variable annuity was built for advisors looking to use guaranteed minimum withdrawal benefits with their variable annuities. A company press release on Insurance News Net entitled “IncomeInsight Helping Advisors Strengthen Retirement Income Portfolios” gives more information on Nationwide’s variable annuities. Confidence in financial security during retirement is at its lowest level in over two decades, and Nationwide believes that they have the products to help advisors make their clients more financially secure into the future. Variable annuities with GMWBs give the potential for a larger increase in retirement income and decrease income risk at the same time. Some advisors also sell fixed equity indexed annuities because they have similar double benefits of the potential for increase with some risk protection as well.
At Nationwide, sales of variable annuities increased 32% from 2009 to 2010, due in part to increasing options of variable annuities with GMWBs. They have an online tool available for advisors to interact with that helps the advisors determine if a variable annuity with a GMWB like Nationwide’s IncomeInsight will work for their clients’ retirement portfolios. If it is determined that the products will work for a particular client, the online tool gives an amount that it recommends be invested as well as an asset allocation strategy. The tool could compare equity linked CDs with variable annuities and other investments to see what might work best for each advisor’s individual clients. While a GMWB carries a fee when added to variable annuities, the guarantees and risk protection that come with it are worthwhile for many investors.
Date posted: May 30, 2011
According to Insurance News Net’s article “Annuity Sales Post Double Digit Increase,” variable annuity assets are at the highest level ever. The guaranteed income from annuities has made them very popular, especially with the millions of baby boomers who retire each year. The Insured Retirement Institute found that 92% of those who have annuities have a high confidence in their financial stability during retirement. The trend of purchasing annuities has been increasing during the first quarter of this year and it is forecasted to continue throughout the year.
Total annuity sales for the first quarter of this year were 17% higher than total annuity sales last year. There was also an increase from the fourth quarter of last year of 5%. Total variable annuity assets are now $1.6 trillion, which is the highest level that has ever been recorded in history. Variable annuity sales increased 4% from the fourth quarter of last year and saw a dramatic 23% increase from the first quarter of last year to the first quarter of this year. Fixed annuity sales increased 7% from the fourth quarter of last year to the first quarter of this year and 6% from the first quarter of last year.
As sales and net cash flow both increased with variable annuity products, it seems to be due in part to better education of advisors. The more they learn about death benefit annuity and other variable annuity products, the better able they are to explain and sell them to retirees. Baby boomers and others nearing retirement are feeling comfortable with their future finances when they are invested in annuities that will last over their lifetime, and in the case of a death benefit annuity, their inheritant’s lifetime.
Date posted: May 28, 2011
Despite the work of the government and many insurers, the use of annuity products in retirement plans is not as common as it should be. Daisy Maxey’s Market Watch article, “Annuities in retirement plans remain rare,” lists some of the options available to investors. Many retirement plan administrators don’t think that the appetite is big for annuities, but BlackRock Inc. says that their research has shown increased interest from plan participants.
Prudential Financial offers IncomeFlex for defined contribution retirement plans. The variable annuity was revamped in 2009 to meet changing demands from plan participants. Investors receive a guaranteed lifetime payout of at least 5% starting at age 65, for a 1% yearly fee. There are 7,000 different retirement plans offering Prudential’s product and over $500 million invested, an increase from last year of $200 million. Fidelity has a program to help retirement plan investors create portfolios by analyzing their individual situation. Some investors worry that 5 year fixed annuity and other annuity rates are fairly low now, but Fidelity can help investors understand the value these annuity products will bring them in retirement.
The U.S. Department of Labor has been looking into multiple regulations regarding annuity products and their use in 401k annuity plans. Some retirement plan sponsors seek more regulation before introducing or expanding their 401k annuity offerings. BlackRock Inc. and MetLife Inc. are working together on the LifePath Retirement Income Fund annuity, but would like more clarification from the government on their fiduciary responsibility offering 401k annuity products. While annuity products are available for purchase by retirement plan participants, the industry is still working on making them more readily available to ensure guaranteed retirement income for investors.
Date posted: May 25, 2011
Variable annuity demand has been increasing for over a year now, according to Bloomberg’s “U.S. Variable Annuity Sales Rise 24% Led By Prudential, MetLife.” Noah Buhayar’s article says that variable annuity sales have increased for five straight quarters as the stock market has risen. Prudential Financial and MetLife have led the way in variable annuity sales and their increases have helped the industry thrive. Sales were up 24% from the first quarter of last year to the first quarter of this year. Prudential sold $6.81 billion of the total $38.9 billion. They were the top variable annuity seller and saw an increase of 40% from last year. MetLife’s $5.68 billion in variable annuities was the second most sold and a 41% increase from last year.
Many changes are expected in the variable annuity industry, which could be one reason for the increase in sales. Investors are trying to lock in guaranteed benefits like death benefits and guaranteed annuity rates for payouts before any changes occur. Equity linked variable annuity products saw large sales as the stock market increased from its lows in March of 2009. Last year the S & P 500 increased 13%, followed by a 5.4% increase in the first quarter of this year. The stock market increase and a possible worry about increasing fees or changes in benefits are a good part of the reason for the variable annuity sales increase.
Date posted: May 23, 2011
While most people rely on the total 401k balance on their statements to plan their retirement, it is more important to know how that money will last by getting an annuity equivalent number. The Lifetime Income Disclosure Act that Congress is researching would require the annuity equivalent number to be listed on 401k statements, according to Tim Grant of the Pittsburgh Post-Gazette. His article, “Bill would require annuity data on 401(k) statements,” says that this annuity information actually gives the clearest picture on where you stand in your retirement planning. The annuity equivalent is the amount of guaranteed lifetime income that retirees would receive at age 65 if they purchased an annuity with their entire 401k balance.
A New Mexico Senator said in the article that half of Americans will not have enough monthly retirement income to allow them to maintain their standard of living, and many Americans are not even aware of that fact. He argues that this bill will let Americans know if they are saving enough to retire and maintain their lifestyle. While the fixed annuity rates at the time the annuity is purchased will determine the exact monthly payout for each individual, the annuity equivalent number will give a good picture of the approximate monthly income retirees would receive if they purchased a fixed annuity with their 401k balance. While the bill is still in the early stages, there are many bipartisan supporters as well as support from community organizations. If the bill does pass, the Department of Labor will be in charge of issuing regulations to 401k providers.