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

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

The Government Accountability Office recommends adding annuity products and waiting to receive Social Security payments, according to Bloomberg’s Margaret Collins.  In the article, “Delay Taking Social Security, Add Annuity to Survive Retirement, GAO Says,” Collins says that the government is looking to protect Americans against longevity risk.  As we live longer, see increasing health care costs, declining home prices and financial markets, it is difficult to find the best way to finance our retirement.  The GAO says that retirees should wait to take their Social Security payments until full retirement age, or later if they can.  Purchasing a lifetime annuity to cover basic expenses is another recommendation from the government.  While their expert doesn’t necessarily recommend annuity products for the highest-income households, they are a great way to help finance the retirement of middle-income and lower-income households who have already built up some savings.

While retirees can start receiving Social Security benefits as early as age 62 in a limited form, full benefits cannot be received until age 66.  But waiting until age 70 to start receiving your benefits could essentially double your purchasing power as opposed to taking them at age 62.  A recent study showed that almost half of us will live longer than our savings last.  Those who buy an immediate annuity with their savings or 401k money will help guarantee that they do not run out of money in retirement.  Only 6% of retirees currently transfer to a 401k annuity upon retirement, but the government hopes to overcome resistance to annuity products through increased education about their benefits.  State Street and BlackRock are leading the way with 401k annuity products for retirees.  Be sure to contact an expert when making any retirement planning decisions to ensure you do what is best for your individual situation.

The 401k annuity looks like the best bet for retirees to replace the pension income that generations before them counted on in retirement.  Fox Business published an article about this by Jennie Phipps entitled “Annuities the Next Big Retirement Option?”  After a government inquiry about the interest of using annuities in 401k plans last year, it seems like a consensus that this is going to be the way to help finance the retirement of many Americans.  Of course insurance companies are an advocate for using a 401k annuity to cover living expenses in retirement.  But the government and employers are also standing behind the investments.  While there are a lot of people on board with annuities, employees are often the ones most wary of the products.  They worry that they have to trust their money to someone else and give up all control.

There are around 6,000 different 401k plans using Prudential’s Income Flex plan.  Variable annuity reviews of the Income Flex say that the popularity comes from the minimum withdrawal benefit in combination with the potential for market upside gains.  All of the new annuity products out there are working to make improvements to give investors what they want.  There are more options, including more annuities where you can continue putting money in after the initial payment.  One of the largest issues that many people have with annuities is the concern over their security.  It is always important to purchase an annuity from a reputable insurer, but there are calls within the industry for some kind of government backed insurance, like the FDIC coverage for banks.  States do cover annuities, up to $300,000 depending on the state.  Some government insurance on annuities might help increase the popularity of the 401k annuity.

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.