Annuity FYI Blog

Nationwide Financial’s IncomeInsight variable annuity was built for advisors looking to use guaranteed minimum withdrawal benefits with their variable annuities.  A company press release on Insurance News Net entitled “IncomeInsight Helping Advisors Strengthen Retirement Income Portfolios” gives more information on Nationwide’s variable annuities.  Confidence in financial security during retirement is at its lowest level in over two decades, and Nationwide believes that they have the products to help advisors make their clients more financially secure into the future.  Variable annuities with GMWBs give the potential for a larger increase in retirement income and decrease income risk at the same time.  Some advisors also sell fixed equity indexed annuities because they have similar double benefits of the potential for increase with some risk protection as well.

At Nationwide, sales of variable annuities increased 32% from 2009 to 2010, due in part to increasing options of variable annuities with GMWBs.  They have an online tool available for advisors to interact with that helps the advisors determine if a variable annuity with a GMWB like Nationwide’s IncomeInsight will work for their clients’ retirement portfolios.  If it is determined that the products will work for a particular client, the online tool gives an amount that it recommends be invested as well as an asset allocation strategy.  The tool could compare equity linked CDs with variable annuities and other investments to see what might work best for each advisor’s individual clients.  While a GMWB carries a fee when added to variable annuities, the guarantees and risk protection that come with it are worthwhile for many investors.

If you are wondering when you will have to take your automatic annuity withdrawals and how much you will have to take, Claudia Buck of the Kansas City Star asked an expert about annuity requirements.  In the article “Check requirements before taking annuity withdrawal,” an investor asks about his withdrawal requirements at age 70 1/2.  He turned 70 1/2 last November and was under the impression that the annuity company would send a notice about his required minimum withdrawal, including the amount he is required to withdraw.  Since a penalty for not making the required minimum withdrawal on time could equal half of the withdrawal amount, it is crucial to make your annuity withdrawals on time.

The expert in the article recommends contacting the annuity company who carries the annuity in question.  When you compare annuities, some are not subject to Required Minimum Distributions so this rule may not even apply to your annuity.  For a tax-qualified annuity, have your annuity company help you determine the amount of your required minimum distribution.  The IRS does not make you take your first distribution until April 1, so as long as this particular investor takes the first distribution by then, they will cover last year’s requirement.  They will have to take a second distribution by December 31 of this year to cover 2011′s requirement.  Since the penalty for not taking required minimum distributions is so high, be sure to contact your annuity company if you haven’t received notice about your withdrawal.

Jackson National Life Insurance Company saw a 37% increase in sales during the first three quarters of this year, due mostly to a great increase in sales of variable annuities.  In the Annuity News Journal article “Jackson National Sales Rise To $14 Billion,” Christi Roberts says that the company’s sales of $14.3 billion jumped 37% from the same time frame last year.  Sales of Jackson’s variable annuities increased 57% to nearly $10.5 billion.

President Mike Wells stresses that Jackson has seen this increased growth because they are offering products with a higher value rather than lowering quality to obtain a bigger share of the market like some of their competitors.  10.5% of their increase came in the first half of the year capping off three quarters with the highest retail sales of variable annuities.  Jackson sold $1.88 billion during the second quarter of 2010, which was the most they have ever sold in one quarter.  They also saw the largest growth of any company in their industry between June 2009 and June 2010 as the company assets increased by over 45%.

They began offering two new lifetime guaranteed minimum withdrawal benefits this year.  One combats taxes by allowing investors to increase the amounts they withdraw.  They also introduced the first customizable GMWB.  Whether an investor is looking for a death benefit annuity or other guaranteed benefits, between this new GMWB and the 8 new portfolios being offered by Jackson, they will find what they need.  Jackson maintains an ‘excellent’ rating from all four of the financial ratings firms, and has over the past seven years.

There are nine new investment products out there to help you both save for retirement and live in retirement and annuities appear more than once on this list.  Ernst & Young compiled the list they say offers you a bulletproof retirement, as written in “Tools to build a bulletproof retirement portfolio” by Robert Powell of MarketWatch.

There are four main products recommended to help you save for retirement.  While target-date funds have drawbacks for some, they can be useful in many circumstances.  Fixed annuities are less complicated than most other annuities and guarantee a minimum return.  Fixed indexed annuity products help conservative investors save for retirement through principal protection and returns based on a stock market index.  A variable annuity with a guarantee is another great way to save for retirement.  Choosing between the guaranteed minimum benefit riders may be difficult, but once you find the product for you it is worthwhile.

While living in your retirement, there are other investments to consider.  Payout funds are very liquid, but your net asset value will fluctuate.  Single premium income annuities are becoming more popular and user friendly for their guaranteed income payments over your lifetime.  Other products to consider include life insurance, long term care insurance, and other combinations.

The guaranteed living benefit rider for variable annuities has become increasingly popular, according to National Underwriter’s “VAs with GLB Rider Rose 18% in 2Q.”  Variable annuity products with the GLB accounted for $20.3 billion of new deferred sales during the second quarter of this year.  This was an 18% increase over first quarter sales.  It was the third quarter in a row that 87% of investors opted for the guaranteed living benefit rider when purchasing their variable annuity products.  LIMRA of Windsor, Connecticut performed the study of 27 different carriers representing 95% of the industry sales in the second quarter.

Other guaranteed benefits were elected about the same percentage of time as in the past.  The guaranteed lifetime withdrawal benefit was elected 64% of the time.  Guaranteed minimum income benefits were chosen in 17% of cases.  Both the guaranteed minimum accumulation benefit and guaranteed minimum withdrawal were chosen 3% of the time.  The variable annuity assets with the GLB rider actually went down 3% to $427 billion in the second quarter as did the total variable annuity assets which went down 5% to $1.36 trillion.  GLBs were available in deferred variable annuity contracts that generated $23.2 billion in premiums.  The guaranteed living benefit rider is really seeing a rise in popularity because of its lifetime benefits.