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.

LIMRA just released annuity sales results from the fourth quarter of 2010 and the total year results, according to Ruthie Ackerman’s article in the Financial Times. “Who Were the Top 20 Annuity Writers in 2010?” summarizes the top sellers.  Total annuity sales were published along with totals for sales of variable annuities and fixed annuities.  Of the top 20, half of them had sales increases over the previous year.  The top three sellers of variable annuities reached sales records, while 70% of the top variable annuity companies saw overall sales increases in 2010.

Prudential Annuities had both the most annuity sales and the highest sales for variable annuities.  They were number one with total annuity sales of $23.3 billion and variable annuity sales of $21.7 billion.  They were fourteenth in their sales of fixed annuities.  Allianz Life of North America sold the most fixed annuities, selling $7.1 billion.  They came in seventh in total annuity sales and thirteenth in variable annuity sales.

The top 20 companies accounted for 80% of total annuity sales, 93% of variable annuity sales, and 74% of fixed annuity sales.  Rounding out the top 10 companies in total annuity sales after Prudential were MetLife, Jackson National Life, TIAA-CREF, AIG Companies, Lincoln Financial Group, Allianz Life, New York Life, RiverSource Life Insurance, and ING.  Many of the top 10 annuity sellers also made the top list for variable annuities and fixed annuities.  In addition to those already mentioned, AXA Equitable and Nationwide Financial were in the top 10 for variable annuities.  For fixed annuities, AVIVA, American Equity Investment Life, and Great American were also in the top 10.  LIMRA’s report shows the entire top 20 list for each investment.

According to “NationWide Wants Different 401k Plans” by Christi Roberts of Annuity News Journal, Nationwide Financial Services is looking to follow the government’s advice regarding 401k plans.  The large life insurance company has proposed a plan to transfer traditional 401k money into 401k annuities.  Employers would invest their 401k contributions in fixed annuities.  While employees would have the option to do that as well, they would still have the ability to invest where they desire.  The goal of this proposal and the U.S. Treasury and Department of Labor is to ensure that Americans have a lifetime stream of income so that they don’t run out of money in retirement.

Only 2% of employers are offering an annuity plan right now as an option for their 401k’s.  With Nationwide’s proposal, employers would get a tax credit for offering 401k annuities.  Nationwide believes that this is a solution to replace the pensions of yesterday that retirees counted on during retirement but that no longer exist for most workers.  A survey conducted by Nationwide showed that 3/4 of adults like the idea of having this guaranteed income stream option for their retirement.  Opponents think that stock market returns will be higher overall than annuity returns, but the past few years have shown that the fluctuations in the stock market can decimate retirement funds.  Fixed annuities are safer and guarantee you not only interest but lifetime income.

Many people have realized over the past few years that they don’t nearly have enough money to live out their retirement.  During and after the financial crisis people were not only hit hard losing some of the investments and savings, they also took stock of what was there and were shocked at how far it would take them.  In “Annuities Can Help Provide Income in Retirement,” a US Insurance editor talks about how important annuities are in a retirement plan.  Company retirement plans and other sources of retirement income should also be used, but annuities work best for a steady stream of income that can last over one’s lifetime.  Many investors use 401k annuities which are purchased from insurance companies using part of one’s 401k savings.  This is an important way to use part of your earned money to fund your basic expenses throughout retirement.

Eric Henderson of Nationwide Financial states in the article that any old annuity won’t do for everyone.  He explains how crucial it is to get a product that is customized for your individual needs.  While a guaranteed income stream throughout retirement is the main goal, advisors also want their clients to have an increasing control over their financial investments and their future income.  He recommends a fixed immediate annuity to help investors remain in partial control.  The author also points to the importance of spreading your money over multiple investments that will be used for different expenses.  Compare equity linked CDs and IRAs when looking into investment income to supplement your annuity purchase.  Annuities and these other products can work together to provide you the most comfortable retirement.

In Jeff Benjamin’s Investment News article “Five ways to boost retirement income,” immediate annuities are at the top of the list.  The best way for retirees to make the most of the retirement savings they have built is to have diverse yet safe investments that will continue to generate income even in retirement.  By establishing a steady income stream that will carry you through rough economic times, you will be able to have the flexibility to manuever through assets with some risk to generate income in retirement.  Five investments that can help those of retirement age with their steady and reliable income stream are immediate annuities, individual bonds, reverse mortgages, convertible bonds, and master limited partnerships.

As the demand has increased for immediate annuities, they have become easier to understand for everyday investors.  A single-premium immediate annuity is one of the best ways to obtain guaranteed predictable income.  For investors who have already retired, the author recommends a simple no-load version without added riders like death benefits.  While your monthly income from the annuity may seem low, experts recommend using a portion of your retirement savings for an annuity and using that payout for everyday expenses.  Then the rest of your savings can be put towards other income growing investments.  New York LIfe, MetLife, Hartford, Nationwide, and John Hancock are some of the post popular insurance companies that work with annuity products.