Annuity FYI Visitor Blog

The former vice chairman of the Federal Reserve Board, Roger W. Ferguson Jr., is working hard to get Americans to increase their savings for retirement.  According to “Former Fed official: Workers need bigger nest eggs” by Len Bosilovic of the Pittsburgh Post-Gazette, the current employee of TIAA-CREF notes that research shows most couples will be $250,000 short of the money they need for retirement.  He believes that more companies need to make a 401k annuity transfer available to their workers upon retirement since only about a quarter of them do currently.  Ferguson says that you need four things in place to save successfully: enough funding, a diverse portfolio, access to quality advice, and guaranteed retirement income to meet your basic expenses.

While saving 10 to 14 percent of your pretax income should be the goal, Ferguson says that workers should save anything they can at any given time.  Too many people wait because they don’t think they have as much as they should be saving or because their companies don’t offer a traditional 401k plan.  Most 401k plans offer diversification and seeing a reputable financial advisor is the best way to keep from getting confused and obtain quality advice.  Annuities are the best source of guaranteeing lifetime income to cover your basic needs, according to Ferguson.  He does suggest looking into annuities that account for inflation or investing in annuities that give you the potential for a rise in income.  Getting started with your savings plan is the hardest part, so even if you think you are starting late just start.

Prudential Financial Inc. and American International Group Inc. contributed to the United States’ largest variable annuity sales increase since 2007.  According to Bloomberg’s “Variable-Annuity Sales Rise 11% as Prudential, AIG Post Gains” by Inyoung Hwang, the $35.5 billion in sales was an increase of 11% for the second quarter of this year.  Prudential sold $5.3 billion of variable annuities to capture the top spot in sales.  This was a huge increase from their $3.38 billion in sales during the second quarter of last year.  Limra International believes that the market is showing signs of recovery since most of the top 20 companies had growth in their variable annuity sales.

After AIG was helped by the federal government, they increased their variable annuity sales 45% from $1.09 billion to $1.58 billion.  AIG was able to increase their operating profit by 17% after the profit from their U.S life insurance businesses quadrupled from last year’s profits.  The second highest sales of $4.5 billion belongs to MetLife Inc., although they experienced a very small decline from the same period last year.  Annuity rates and other factors contributing to the variable annuity sales affected the top companies differently.  The third and fourth place sellers were TIAA-CREF and Jackson National Life.  The industry is hopeful that this second quarter increase will continue into the future.

Variable annuity sales increased from the 1st quarter of 2009 to the first quarter of 2010, according to Insurance News Net’s “US Sales of Variable Annuities See First Year-Over-Year Gain in Two Years.”  With $31.4 billion in total sales, variable annuities increased 3% from the same time last year.  The first quarter of 2008 was the last time that there was such an increase in variable annuity sales.  A spokeswoman for the Insured Retirement Institute says that this marks a slow and cautious return to the stock market for investors.  The sales are from both individual and group annuities.

Eighty-percent of investors who purchased a variable annuity also included some type of living benefit guarantee.  The most popular was the guaranteed lifetime withdrawal benefit.  Purchasing a death benefit annuity was also widely popular to protect investors’ heirs.  Prudential Financial, Inc. remained the top variable annuity seller in the first quarter of 2010, after capturing the top spot for all of 2009.  The rest of the top five companies were MetLife, TIAA-CREF, Jackson National Life and Lincoln National Corp.  The consensus with variable annuities is that they are getting simpler for consumers and less risky for insurers.

When buying an annuity, it’s very important that the insurer providing the product is stable. Doing so minimizes the risk that you will lose part or all of your investment. Ratings are a good way to find out about a company’s strength. Here are TheStreet.com’s 10 strongest annuity insurers, as reported by Melissa Gannon:

1. Teachers Insurance and Annuity Assocation of America (TIAA-Cref)
2. State Farm Life Insurance Company
3. Country Life Insurance Company
4. State Farm Life and Accident Insurance Company
5. American Family Life Insurance Company
6. New York Life Insurance and Annuity Corporation
7. Massachusetts Mutual Life Insurance Company (MassMutual)
8. Pacific Life Insurance Company
9. New York Life Insurance Company
10. Fidelity Investments Life Insurance Company

On The Huffington Post, Dan Solin writes that immediate annuities are a less publicized yet suitable investment for retirees or those about to retire. He cites evidence that people who invest in an immediate annuity as part of their retirement portfolio are less likely to outlive their savings, a big concern for baby boomers.

Several companies offer immediate annuities, including:

• Vanguard
• Fidelity
• Charles Schwab
• TIAA-CREF