Annuity FYI Blog

The retirement income business and the broker-dealer unit have been combined by New York Life Insurance Co.  They just reorganized their company into two separate businesses.  Their insurance group will remain a separate entity from the other business of retirement income.  New York Life Investments, the broker-dealer unit, will join with New York Life’s retirement income business and be headed by Executive VP John Y. Kim.  Currently, the retirement income business includes both immediate and deferred fixed annuities as well as variable annuities.

Kim has been in charge of New York Life Investments since 2008.  He will now be in charge of New York Life’s retail annuities and mutual funds, as well as their retirement plan services and institutional asset management.  Executive VP Chris Blunt will be running the separate insurance business; he previously was in charge of the retirement income business that has been combined with New York Life Investments.  His job responsibilities in addition to running the insurance business will include the company’s long term care insurance and the business operations of marketing, finance, technology, and service.  The Mexico operations are also now part of this new group.

New York Life’s market share has increased to double digits since they started their reorganization in 2008.  They have also seen significant growth in their investment business and retirement products like annuities.  This realignment will help them keep their focus on agency led distribution.  Their 12,000 agents will still be overseen by Executive VP Mark Pfaff.  The company believes this realignment will help them keep their top spot in the life insurance industry and annuity industry, as well as increase their other retirement business.  A.M. Best rates New York Life Superior with an A++ score.

Written by Rachel Summit

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In “Why consider an annuity?,” Scott Lunsford writes in the Chillicothe Gazette that there is no better time than now to purchase an annuity.  He says that while some annuities can be complicated, a fear of many people, a fixed annuity is straightforward and offers you a multitude of benefits for your retirement years.  Since you insure your house and car with an insurance company, it is a wise decision to insure some of your retirement savings with one as well.

Fixed annuity rates are currently 3.5% and are guaranteed not to go below 2%, something that can’t be matched by many other savings vehicles.  You also are typically allowed to withdraw up to 10% of your money each year without a penalty and with death benefits, you can avoid the hassle of probate court after death.

Fixed annuities are similar to bank CDs, with the exception that they are most often bought through an insurance company rather than a bank.  Annuities are different in that they are tax-deferred and offer more flexibility than bank CDs and other savings vehicles.  They also have guarantees that last over your lifetime and in some cases, your spouse’s lifetime as well.  The author believes that everyone should at least consider purchasing an annuity, especially because of the volatile stock market and very low interest rates that we are currently experiencing.

Written by Rachel Summit

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In Maria Wood’s LifeHealthPro article “Checking Into Annuities,” the author draws a comparison between the annuity industry and the hotel industry after working in both.  Both annuities and hotels may seem like simple products at first glance, but both have many different options and their industries work hard to cater to the needs of their clients.  For people who didn’t want to pay more money for hotel amenities they didn’t use, hotels started changing their offerings and excluding some items to make rates cheaper.  There is always the option of an expensive hotel with all the amenities for those looking of course.

The annuity industry works hard to to cater to clients’ needs while maintaining their bottom line.  That is what brought about the options of fixed annuities, variable annuities, indexed annuities, and deferred versus immediate annuities.  Some annuities exist that combine long term care insurance or life insurance with an annuity product.  There are many options for funds, riders, and distribution channels when looking into the best immediate annuities and deferred annuities.

Innovation is important in both the annuity industry and the hotel industry.  With hotels, it ensures that everyone can get the exact amenities they want for the price.  The same holds true for annuity products.  If you want to pay more for GLWBs, death benefits, or other annuity riders; that is available to you.  Variable annuities are great for investors who like some risk and can handle stock market ups and downs.  Those looking to take on little to no risk are better suited for indexed annuity products.  Annuities and hotels both try to cater to the clients who use or will use them.

Written by Rachel Summit

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There is a good chance that you are one of the many people who underestimate the strain inflation is likely to place on your finances in the future.  It is important to account for inflation in one way or another so that your money doesn’t run out faster than you planned.  Steve Burns of the Daily Breeze was asked about inflation and gave his answers in “Keeping up with inflation — stocks vs. bonds.”  Burns recently published an article about evaluating Social Security benefits through the use of an immediate annuity calculator.  The article said that the cost of an inflation-adjusted annuity would be about 50% more than the cost of purchasing a fixed annuity not adjusted for inflation.  A reader wrote in to ask Burns how he came up with this percentage and if he took age into consideration.

He looked at two different companies offering inflation-adjusted annuities.  While the 50% figure seems high to those reading it, he believes that many of us underestimate the real effects that inflation will have.  A 55-year old man using $100,000 to buy a fixed annuity with lifetime income would get a monthly payment of $420.  Compare that to an inflation-adjusted annuity where your payments would start at $268 per month.  That equals out to a 57% increase between the two types of annuities.  That number goes down to 39% if you wait ten years and purchase the annuity at age 65.  While there is a steep increase in the cost of an inflation-adjusted annuity, it is important to to account for inflation in some of your investments, whether it be your annuities or not.

Written by Rachel Summit

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In the U.S. News & World Report article, “Do You Need an Annuity?,” Phil Taylor goes through the benefits of annuity products in retirement.  Annuities came about to ensure that retirees do not outlive their savings.  Because of their low risk, fixed annuities are a conservative investment popular with retirees because of their tax-deferral benefits, exemption from creditors, and avoidance of probate through death benefits.  Their penalty for early withdrawal is usually gone after less than ten years and there is usually no limit to the amount of contributions you can make.

The article describes how you receive monthly income payments from an insurance company in exchange for either a lump sum initial payment or several installments.  The amount you’ll be paid out is predetermined whether the amount paid in is more or less that the payout you’ll get.  The payout options are detailed as follows.  If you choose straight life, you’ll get monthly payments for as you long as you live, but nothing will be passed on to your heirs.  If you choose life with period certain, death benefits will be paid to your heirs to make up for any money you paid into the annuity that has yet to be paid back.  There is also the choice of joint life for you and a spouse or joint life with period certain where your heirs would receive death benefits just like the above mentioned annuity.

With a systematic withdrawal, your payments will be fixed and will come to you either monthly, quarterly, or yearly.  Finally, you can get a lump sum annuity payment at a date in the future.  Fixed annuities are a great option for retirees, especially those who don’t have traditional pensions or multiple sources of monthly income like Social Security.  Speak with an expert for more information and to see if an annuity will work for your retirement.

Written by Rachel Summit

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