Annuity FYI Blog

Allianz Life recently found that the majority of Americans are searching for guaranteed income in retirement, but don’t know how to find it.  According to a company press release, Allianz Life Insurance Company of North America conducted a survey showing that 86% of non-retired Americans want to have a guaranteed income stream in their retirement.  That was the most popular choice for having a secure retirement; next was having a 401k plan, selected by 71% of those surveyed.  Transferring to a 401k annuity is an excellent way for those who already have 401k plans to receive the guaranteed income benefits of annuities.

Close to half of those surveyed said that obtaining this guaranteed retirement income stream was the most important retirement need that they had yet to meet.  They found it much more important than finding a job that offers a 401k or getting a diversified portfolio of investments.  The President and CEO of Allianz is not surprised to find so many Americans looking for a guaranteed income stream in retirement, but worries that Americans aren’t informed enough about the annuity products that can make this retirement income stream available to them.

Annuities pool risk, and they are the only retirement income products to do that, therefore annuities are the product to guarantee retirement income over your entire lifetime.  Of the non-retirees surveyed, only 8% currently have an annuity.  Shockingly, 40% don’t have any retirement investments at all and 26% don’t have a plan to get them through retirement.  Allianz Life is dedicated to working with consumers to educate them about the benefits of annuity products and help them make a secure retirement with a guaranteed income stream.

Written by Rachel Summit

In John F. Wasik of The New York Times’ opinion, there is a “Two-Step Retirement Plan That Strengthens Your Nest Egg.”  One of the best things you can do for yourself financially is to delay receiving Social Security payments.  While you are able to get them as early as age 62, you will get the most money if you wait until age 70.  Even if you feel that you can’t wait that long, each year you go past 62 will earn you a certain percentage increased payment, depending on when you were born.  If you are in poor health or have too much debt to manage, it may make sense for you to receive your Social Security sooner.

The way to determine how long you can wait to collect Social Security is to figure out how you’ll fill the income gap in retirement.  Fixed annuities guarantee monthly payments that can help you meet your basic living expenses while waiting for your government benefits.  Defined-benefit retirement plans usually offer choices for fixed annuities, although not many workers have these plans anymore.  If you have a 401k or other defined-contribution plan, some offer 401k annuities while others require you to take out your money and buy an annuity on you own.  A recent study showed that people with net wealth between $349,000 and $1.5 million almost always maximized their retirement income when they delayed Social Security payments and used fixed annuities to supplement.

Written by Rachel Summit

A new variable annuity rider from Securian helps to give retirees the income protection and growth that they’re looking for, according to a company press release.  Whether making a 401k annuity transfer or purchasing a variable annuity before retirement age, adding the Ovation Lifetime Income rider from Securian gives investors a great growth potential.  This rider can be added to their MultiOption variable annuity for an added fee and can give retirement income for decades.

There are four ways to grow your guaranteed income with the Ovation Lifetime Income rider.  It’s even possible to grow your income when markets are down.

• Every year the benefit base will be reset to lock in any gains since the last contract anniversary date.
• For up to ten years, you will get a 6% growth on your benefit base each year that you don’t take a withdrawal, unless of course your reset would be higher.
• If you’ve gone ten years without a withdrawal, the benefit base increases to 200% of the original benefit base plus any other purchases you made in the first year.  You also get 100% of any purchases made after the first year.
• Your guaranteed income is based on the age at which you add the benefit.  You can get up to 6.5% the older you are, or 4.5% if you are younger.

You have the option of adding a spouse on to receive joint benefits with the Ovation Lifetime Income variable annuity rider as well.  Securian boasts that not only do investors get guaranteed retirement income for life, they have a lot of potential for growth over the years.

Written by Rachel Summit

There will soon be 77 million baby boomers beginning to draw down their retirement income after spending years in the accumulation phase.  Insurance News Net’s article, “Retirement Income Fever,” discusses the different products available and what changes might be in store.  Between 2006 and 2010, the assets in retirement income increased to $3.3 trillion.  That is 11% of all investable household assets, a number expected to grow to 25 or 30% by 2020.  The financial industry has been inundated with new products, including 15 new variable annuities in 2010.  There were also 21 new living benefit riders introduced to improve upon existing annuities.  This year, there have already been 3 new variable annuities and 8 living benefit riders introduced.

For at least the next couple of decades, retirement income will be the investment business’ largest item.  Many advisors and retirement plan sponsors need better information on annuity products because some believe that they can replicate annuities with other products.  While some new investments do offer monthly income streams similar to annuities, the article states that while good in their own right, these products can never replace annuity products because only annuities offer a guaranteed stream of retirement income.  Retirement income products have had a slow acceptance rate by plan sponsors who fear that they are solutions looking for a problem rather than fixing a current problem.  401k annuities offer retirees a way to turn their lifetime working savings into a guaranteed income stream.  Companies who sell annuity products are working hard to convince advisors and plan sponsors theirs are the best retirement products.

American Equity Investment Life Holding Co. CEO Wendy Waugaman was interviewed in the Des Moines Register article “W.D.M. firm’s CEO talks of annuities, economic growth.”  American Equity has the second highest sales of fixed equity indexed annuities, just above Aviva USA and behind Allianz Life.  The company was started in 1995 and went from selling $150 million of annuities in 1997 to $2 billion in 2001.  Their revenue is now up to $28 billion, largely based on sales of fixed equity indexed annuities.  Investors look to annuities even more in volatile markets and for good reason.  If you had purchased a fixed annuity in 1998 from American Equity for $100,000; the 2010 value would have been over $160,000.  In comparison, the same investment in an S&P fund would have been worth just under $109,000.

These guaranteed interest rates make annuities very popular, especially as 401k annuities purchased with some of a retiree’s 401k plan.  Waugaman answered questions about everything from annuity basics to the inner workings of American Equity.  When asked how American Equity makes money from annuities, she says that it is similar to a bank loaning your money to other people while paying you interest.  She says that they are growing faster than other annuity companies because of their excellent customer service to both agents and investors.  After being asked about interest rates, she was honest and said that they are frighteningly low.  She is hopeful that they will gradually increase so that they can offer higher immediate annuity rates and America can come out of the financial crisis.  American Equity has hired 80 people over the last six months and they have been in every area of the business.  American Equity is poised to retain their high position in the fixed equity indexed annuities market.