Annuity FYI Blog

By choosing an immediate annuity at the beginning of your retirement, you ensure that all of your tomorrows are protected.  In the Business Day article, “With annuity, you can decide tomorrow’s income stream today,” Modestus Anaesoronye says that there are some things to take into consideration before choosing your immediate annuity.  Two of the most important things to consider for your immediate annuity are the safety of the insurance company carrying your guarantee and the price, or how much monthly income you will receive.  While most states guarantee some amount of your annuities if the insurance company becomes insolvent, it is best to find a strong company with good ratings.  Make a monthly budget in retirement to determine how much you will need to receive from your annuity to cover expenses not covered by social security or other income you’ll receive.

The article offers five things to consider when you are looking for an annuity.  The first is to shop around because even the best-rated companies compete with each other and offer deals from time to time that make their immediate fixed annuities better than someone else’s.  Don’t take a risk with your annuity purchases.  They should be the safest part of your investment strategy; use stocks for your riskier investments.  It’s not a bad idea to diversify and buy a few annuities from different insurers to get added benefits and safety.  Keep your annuity purchases simple.  If you want to add death benefits or inflation adjustment that is great, but don’t add a bunch of riders that you really don’t need.  Make sure that you know the commissions you’ll be paying up front and in detail.  Any commissions paid come out of your monthly income, so make sure they are fair and transparent.  An immediate annuity is a great product to finance your retirement, so do some research and protect your tomorrows.

Written by Rachel Summit

Follow Rachel Summit on Twitter http://twitter.com/#!/financemama

As an alternative to long term care insurance, LTC annuities are becoming increasingly popular.  This information comes from the AdvisorOne article “An Annuity Alternative to LTC Insurance,” by Robert Bloink and William H. Byrnes.  LTC insurance helps to pay for long term care should you need it, but it can be difficult for some people to qualify for and is a tough sell since there is a good chance that you’ll never use it.  LTC annuities, however, function like a typical deferred annuity which can last a certain number of years or over your entire lifetime.  They also offer a payout usually 200-300% higher than the annuity’s face value.  If you compare annuities with LTC insurance, they seem to be a better alternative for many people now.

Due to medical condition or age, there are many denials for those applying for LTC insurance.  Requirements for LTC annuities are not as strict, allowing more people to use them as a form of protection against the high costs of long term care.  With LTC insurance, you may never need a payment from the policy and you will not be able to pass the money onto your heirs.  But LTC annuities pass death benefits onto your beneficiaries in an amount based upon whether or not you used any money for LTC care.  While the payout for an LTC annuity can be much less than that for a traditional annuity, LTC annuities have significant tax advantages.  There is a newer option for a joint LTC annuity that is a good idea for couples to look into as well.

Written by Rachel Summit

Follow Rachel Summit on Twitter http://twitter.com/#!/financemama

Retirement income planning isn’t easy. It’s more difficult to figure out how to sell your investments and spend the proceeds in retirement than it is to save and invest in the first place.

Investing is a bit like putting an astronaut on the moon. Not especially hard. Retirement spending, however, is a bit like trying to bring the astronaut back to earth safely and in the vicinity of recovery ships. A much more complicated challenge.

I won’t suggest that it’s harder to spend your savings than to earn money in the first place. But the challenge of stretching limited savings over an indefinite length of time can pose some unfamiliar riddles and even a few painful trade-offs.

Annuity purchases themselves are complex. You have to decide how much to spend, how to customize the contract, and how much to reserve for emergencies. But the complexity is temporary. Once you put guarantees in place, the pressure lifts. Used wisely, annuities can make financial life in retirement much simpler.

Written by Kerry Pechter

A recent LIMRA study showed that 35% of retirees generate retirement income from annuities, but the investments only account for 4% of household income in retirement.  Most people still use social security and pensions to cover their living expenses in retirement.  But with social security’s future in question and traditional pensions making way for 401ks, LIMRA expects both the number of people purchasing annuities and the amount they contribute to household income to increase.  This information comes from the Financial Planning article “LIMRA Study: Retiree Reliance on Annuities is Small, but Growing” by Dave Lindorff.

Those interviewed had minimum incomes of $35,000, were aged 55 to 79, have been retired a year or more, and do not work at all to bring in income.  The guaranteed income is by far the most popular benefit and reason for buying annuities.  Guaranteed income benefits were prevalent in 40% of the annuities owned by interview respondents.  Around 20% of those who have annuities chose immediate annuities, according to the survey.  The best immediate annuities for this 20% varied, while the rest of the respondents carried deferred annuities.

Income was not much of a determining factor as to who purchased annuities.  Around one-third of households seemed to own an annuity product in the group with incomes under $75,000.  Those with incomes over $75,000 only had about 5% more annuities owned.  The main difference in who owns annuities was related to the amount of household assets.  Households with assets below $100,000 only owned annuities 22% of the time.  For households with assets between $250,000 and $499,000, 45% had annuity income.  And 40% of those with assets greater than $500,000 use an annuity to help finance their retirement.  LIMRA only expects those numbers to grow.

Written by Rachel Summit

According to Investment News’ Darla Mercado, financial advisors are more loyal to Jackson National Life Insurance Co.’s variable annuity products than to any other company.  In the article, “Advisers most loyal to this VA provider,” we learn that Jackson National had the best variable annuity reviews followed by Prudential Financial Inc.  Jackson moved up from second place last year to throw Prudential out of the top spot this year.

Cogent Research performed the study of over 1,500 financial advisors.  They were asked what percentage of their business was dedicated to variable annuities and they rated their happiness with certain variable annuity factors.

Jackson’s internal wholesaler support had such a high ranking that it helped them grab the top spot.  Prudential had the highest variable annuity reviews for different product features, even though they didn’t get the top spot overall.  Advisors liked their guarantees, especially the Highest Daily feature.  Jackson does have nearly 100 subaccount choices as well, which still helped them reach number one.

The ChoicePlus variable annuity from Lincoln National kept them in third place this year.  Ameriprise Financial maintained their fourth place spot year to year.  Nationwide took the fifth spot from Ohio National, who came in seventh.  MetLife was in sixth place this year as well as last.  Sun Life, Allianz Life, and Transamerica finish the top ten for variable annuities.

Written by Rachel Summit