Annuity FYI Visitor Blog

In “Prudential Experts Discuss America’s Retirement Income Challenge”, a press release from Prudential, the recent podcast from their experts is explained.  They talked about steps that can be taken to help boost Americans’ retirement savings during their seven-minute podcast.  Investors who took big losses recently have little confidence in the stock market, even as it rallies.  As the top seller of variable annuities in 2009, Prudential believes that these are a top solution for guaranteeing income in retirement.  Their product line carries an array of options for nearly any investor.  A volatile market in the years close to and just after retirement will have devastating effects on one’s savings, so having an option in your retirement portfolio with guaranteed income is really a necessity.

Most Americans would prefer that their work savings plans automatically turned into a stream of income for life through a 401k annuity or other option.  With many retirees needing thirty years or more of income, investors and advisers need to do significant research to ensure that retirees’ money will last as long as they need it to.  Prudential Retirement introduced IncomeFlex in 2006, the first program offering a guaranteed income component to work defined contribution plans.  The same year, Prudential Annuities came out with its Highest Daily rider for variable annuities.  The option compounds growth captured from an annuity’s highest day until the money is withdrawn.  As with all retirement options, products are not right for everyone and must be fully researched before purchase.  But Prudential believes that annuities are an important aspect of any retirement plan to guarantee lifetime income.

“Build a better 401(k)” by Eileen Ambrose of The Baltimore Sun talks about some ideas for making Americans’ retirement last throughout their lifetime.  At the same time as more Americans are living to the age of 100 and beyond, we are in a time where fewer people are saving for a retirement that could be much longer than our years working.  With more people approaching retirement putting Social Security safety into question and the lifetime income of traditional pensions a thing of the past, the 401k annuity has been getting a lot of attention from people like President Obama.  Because annuities provide a lifetime stream of income in exchange for a lump sum payment to insurance companies, the idea of combining them with 401k’s housing your retirement money makes sense.

While annuities have a lot of options to research, using some of a 401k to purchase one for guaranteed lifetime income is right for many people.  Retirees are handed their 401k in a lump sum at retirement to live off for the rest of their lives.  They can use some of the money to purchase immediate annuities at retirement, but aren’t always educated about the product.  President Obama’s council has two ideas for matching 401k’s and annuities.  At age 45, 401k plans can start putting retiree’s money into an annuity or they can purchase an annuity at retirement with half of their 401k savings.  The stability of the insurance company from which annuities are purchased is crucial, so there is a call for a federal insurance fund similar to the FDIC to back up these annuities in case the insurance company goes out of business.  The government is still doing research to determine what their recommendations will be.

According to Darla Mercado of Investment News, insurance companies have new targets in their sight to increase sales of variable annuities.  Mercado’s article “Insurers target new channels to help boost VA sales” talks about the insurance companies’ plans.  At the Insured Retirement Institute’s marketing conference in New York this week, the panel spoke of their need to change direction due to the financial crisis.  Insurers are looking to reach out to different types of potential customers and advisers in previously uncharted territories.

One of the biggest groups of people who could potentially benefit from variable annuities are 401k participants and managed-money programs.  Insurers hope that pre- and post-retirees will make 401k annuity transfers and purchase variable annuities from them.  The purchase of annuities will guarantee a lifetime income stream throughout retirement.  Some new products have also come out of this need to advance with the changing economic climate.  Lincoln Financial is introducing a long-term-care rider with both their fixed and variable annuities.  Updates and changes from insurance companies are meant to help consumers in the long run.  A little competition can breed great ideas.

In The Insurance Letter’s article “Proposed Legislation Should Boost Retirement Annuity Sales,” Alan Levine describes Senate bill 2832.  The proposed amendment to the Employee Retirement Income Security Act of 1974 is meant to help broaden the awareness of planning for a lifetime of retirement income.  Most retirement plans now only show the lump-sum value on participants annual statements.  This bill would require 401k and other private retirement plans to show more information on their annual statements.  Plan sponsors would have to show how that lump-sum value will pay out in guaranteed monthly income, based on retirement age and the investment vehicles used by participants.

Senate bill 2832 could encourage investors to make 401k annuity rollovers with their retirement income.  Since a lump-sum value is really only half of the retirement picture, investors ability to see how their money translates into guaranteed lifetime payments is crucial.  With the government’s possible new requirements, 401k and other retirement plan sponsors might be adding more immediate annuities and variable annuities that have guaranteed lifetime withdrawal benefits.  With more than $3 trillion in retirement plan assets, the government’s regulations could surely effect a lot of annuity decision making.  The government would not require annuities to be offered, but by requiring monthly payout options to be disclosed, annuities seem to offer the best guaranteed income benefits.

According to “More 401(k) Sponsors Consider Annuities: Survey” from the National Underwriter Online News Service, the 401k annuity is becoming increasingly popular.  A recent survey from Watson Wyatt Worldwide Inc. shows that more and more employers are offering annuity products to employees participating in 401k programs.  Companies are looking to provide their employees with a steady stream of income after retirement and they are realizing that annuities are a great way to offer just that.

The U.S. Department of Labor is working to get employers to offer lifetime annuities or other comparable products in their defined contribution plans.  The WWW survey showed that 22% of employers with 401k plans offer annuity choices.  At least 10% more are considering adding the option for their employees.  The recent economic crisis forced many employees to hold off retiring because their 401k retirement accounts lost so much value.  Annuities are an investment vehicle that eliminates that risk of losing money in a bad economy so they are a great product from the employee’s standpoint.  The reason that employers were less apt to offer annuities in the past was a lack of employee demand and the administrative complexities.  Now that the 401k risks have been exposed, both employers and employees are looking for less-risky ways to use their 401k money for retirement.