Annuity FYI Visitor Blog

In “Consumers’ Interest in Guaranteed Living Benefits Remains Strong in 2009, LIMRA Reports” from Insurance News Net, LIMRA’s 4th quarter findings are detailed.  When variable annuities offer the Guaranteed Living Benefit (GLB) rider, 84% of people elected to get the rider in the 4th quarter of 2009.  The four quarters prior to last, 89% of people elected for the GLBs.  The small decline is associated with a similar decline in the guaranteed living withdrawal benefit rider (GLWB), although the market share for GLWBs was still high.

LIMRA believes that the high number of investors opting for the security of the GLB is directly related to the shaky economy.  Even though insurance companies are trying to decrease the attractiveness of these low-risk riders, 80% of variable annuity contracts last year elected a GLB.  From the beginning of 2009 to the end, sales of variable annuities with GLBs attached increased by 41%, while total variable annuity assets increased by 21%.  New investors’ high rate of election of the GLB rider accounts for the larger increase of products with GLBs.  Many older annuities do not have the rider and are past the point of having a surrender charge so may leave the market.

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.

In “AXA Equitable Launches Variable Annuity With Dual-Account Investment Platform,” a staff reporter at Insurance Business Review describes AXA’s new product.  AXA Equitable Life Insurance Company says that their new variable annuity gives a greater selection of investment portfolios and protection from the downside.  Variable annuities across the market are changing after losing steam in the recent financial crisis.  Retirement Cornerstone is their new dual-account investment platform.  It is a tax-deferred platform supporting two accounts that are interactive.  The first focuses on maximizing the performance of your investments by using money managers.  The second account is optional and simply focuses on retirement protection.

The account focused on long-term accumulation gives the choice of over 90 different investment portfolios with different investment styles and asset classes.  The account with downside-protection has a guaranteed income benefit option which invests in index portfolios and asset allocation.  The Retirement Cornerstone has what AXA believes to be one of the best annuity rates available for similar products.  Their roll-up rate is one point higher than the 10-year treasury rate average and is updated annually.  The dual-account platform has many tax benefits including tax-free transfers among portfolios which helps investors build lifetime income and respond to changes in economic conditions.  AXA believes that their new annuity product is a unique response to the past market turmoil which allows investors to build up their cash and protect it in the future.

“A Summer Crop of Variable Annuities” in the Retirement Income Journal summarized this summer’s spectrum of variable annuity products.  Author Kerry Pechter stated that insurance companies are either reducing the cost of the product and making it much more simple or keeping the elaborate benefits and increasing the cost.  John Hancock and MetLife introduced simplified versions while Allianz Life and Genworth Financial’s new products are similar to traditional variable annuities.  As equity markets have rallied this summer from a DJIA of 6,700 points in March to 9,100 this week, this may be the time for some new products.

John Hancock Life’s AnnuityNote is one of the more straightforward products on the market.  There are one investment and one income option and only one inclusive cost.  With an S&P rating of AA+, John Hancock is aiming this product to the advisers that don’t normally recommend annuities, marketing AnnuityNote like “a mutual fund with a true guarantee.”  The Simple Solutions variable annuity from MetLife is also meant to be easily understood and lower cost than traditional VAs, while still offering good benefits.  It has a guaranteed lifetime withdrawal benefit (GLWB), one income option, four options for investments, and a short application that is only three pages.  The annuity rates of payout vary with age and investors have a choice of how they annuitize.

On the other side of the spectrum, the Vision variable annuity from Allianz Life has a complex prospectus and fees can be around 4%.  An Investment Protector and and Income Protector are the main riders offered with this product.  As you grow closer to receiving the income payments, the investments become more conservative, no matter which investments are chosen.  Their Vice President stresses that this new offering communicates what the company has learned in a tough market about product offerings and cost.  RetireReady One from Genworth also offers an Income Protector for its GLWB rider.  Speak with an expert about the details regarding any of these variable annuities.

Many consumers ask what guaranteed lifetime withdrawal benefit features are the best to have.  The article “Which GLWB Is ‘Best?’” by Jack Marrion of National Underwriter seeks to answer this question.  The purpose of the GLWB is twofold: erasing the fear of running out of money in the future and giving control of the product to you.  No matter which GLWB one chooses, the benefits are the same.  Annuity owners will receive a percentage of the annuity value over their lifetime even if the actual cash value has been depleted.  The owner also has the option to change the payment or cash in all or part of the annuity because of the control they retain.

So which type of GLWB is actually the best?  Basically it depends on the details and goals of the individual consumer.  Guaranteed lifetime withdrawal benefits that contain the highest payout factor or the largest bonus appear to be the best option for owners who need to receive the money immediately or in the very near future.  But if the owner has over ten years before they need to collect and they desire more certainty, they should look to focus on a strong income growth factor.  An expert can help you look into all of the GLWB features and see what is best for your future.