Annuity FYI Blog

Some scary statistics came out of ING’s Retirement Research Institute last year.  A whopping 71% of Americans don’t have any kind of formal retirement plan in place.  That’s nearly 3/4 of America that either won’t be able to retire or will have to struggle financially because they didn’t plan ahead.  This is not good news seeing that Americans are living longer than ever and costs are steadily increasing.  This information comes from Financial Planning’s Danielle Reed, in her article “Year-End Reality Check: 71% of Americans Don’t Have a Retirement Plan.”

Of those researched between the ages of 25 and 69, working full-time and earning $40,000 or more per year, 48% of them feel unprepared for retirement.  And that isn’t to say that they don’t have any plans in place.  Seventy-five percent of them are contributing to some type of workplace retirement plan, they are simply worried that it isn’t enough.  This is why many experts want you to compare annuities when planning your retirement.  They are a perfect bridge for the gap between your workplace plan savings and the expenses you will have.

More than 4,000 men and women were surveyed for this study and less than half of them had actually sat down and figured out how much money they will need in retirement.  Not surprisingly, only 28% were working with some type of financial planner to help them ready for retirement.  If more were working with an expert, they surely would have calculated how much they need to live off of in retirement.  By using 401ks, IRAs, pensions, and Social Security in conjunction with annuity products, Americans should be able to finance their retirement well.  We just need to make sure we save enough to use these products and live how we’d like.

Written by Rachel Summit

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The retirement income business and the broker-dealer unit have been combined by New York Life Insurance Co.  They just reorganized their company into two separate businesses.  Their insurance group will remain a separate entity from the other business of retirement income.  New York Life Investments, the broker-dealer unit, will join with New York Life’s retirement income business and be headed by Executive VP John Y. Kim.  Currently, the retirement income business includes both immediate and deferred fixed annuities as well as variable annuities.

Kim has been in charge of New York Life Investments since 2008.  He will now be in charge of New York Life’s retail annuities and mutual funds, as well as their retirement plan services and institutional asset management.  Executive VP Chris Blunt will be running the separate insurance business; he previously was in charge of the retirement income business that has been combined with New York Life Investments.  His job responsibilities in addition to running the insurance business will include the company’s long term care insurance and the business operations of marketing, finance, technology, and service.  The Mexico operations are also now part of this new group.

New York Life’s market share has increased to double digits since they started their reorganization in 2008.  They have also seen significant growth in their investment business and retirement products like annuities.  This realignment will help them keep their focus on agency led distribution.  Their 12,000 agents will still be overseen by Executive VP Mark Pfaff.  The company believes this realignment will help them keep their top spot in the life insurance industry and annuity industry, as well as increase their other retirement business.  A.M. Best rates New York Life Superior with an A++ score.

Written by Rachel Summit

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The Annuity News Journal’s Christi Roberts says that “Variable Annuities Could Save Social Security.”  I think there is a valid argument for this point, but can’t imagine how long of a road it would be to get the government on board.  Social Security has been in place since 1935 and changing the system would be difficult to say the least.  But the system has become flawed as more money continues to stream out than go in.  Something has to be done to correct the demise of Social Security so that our kids and their kids will receive their money in retirement.  Maybe switching the system to variable annuities will actually be the way to go.

One advantage of variable annuities is that they grow tax-deferred until a date later in the future when you need money.  They also offer stability with monthly income payments and protection in a down market.  If you are lucky enough to possess a variable annuity during a market increase, your benefits will skyrocket.  If the Social Security system started using variable annuities, growing their income tax-deferred would at the very least push the problem of running out of money farther into the future.  Best case scenario, which many people believe is a possibility, restructuring Social Security in this way could correct the problems it faces today.

Written by Rachel Summit

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In “Why consider an annuity?,” Scott Lunsford writes in the Chillicothe Gazette that there is no better time than now to purchase an annuity.  He says that while some annuities can be complicated, a fear of many people, a fixed annuity is straightforward and offers you a multitude of benefits for your retirement years.  Since you insure your house and car with an insurance company, it is a wise decision to insure some of your retirement savings with one as well.

Fixed annuity rates are currently 3.5% and are guaranteed not to go below 2%, something that can’t be matched by many other savings vehicles.  You also are typically allowed to withdraw up to 10% of your money each year without a penalty and with death benefits, you can avoid the hassle of probate court after death.

Fixed annuities are similar to bank CDs, with the exception that they are most often bought through an insurance company rather than a bank.  Annuities are different in that they are tax-deferred and offer more flexibility than bank CDs and other savings vehicles.  They also have guarantees that last over your lifetime and in some cases, your spouse’s lifetime as well.  The author believes that everyone should at least consider purchasing an annuity, especially because of the volatile stock market and very low interest rates that we are currently experiencing.

Written by Rachel Summit

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Pacific Life has a way to increase your retirement income with their fixed indexed annuity, even if the markets don’t increase in your favor.  Their Pacific Index Choice deferred fixed indexed annuity has been popular lately as those nearing or in retirement seek to protect their savings while hoping for growth in the markets.  But in the event that the markets don’t increase, while your principal will still be safe, there is a new option available that still allows you to increase your retirement income.

The Enhanced Lifetime Income Benefit gives you the option to grow your income, regardless of what happens in the marketplace.  Your income base will increase by 8% every year for ten years if you put off taking your withdrawals for an extended time.  This can add up to a significant amount of money, especially for people who haven’t earned interest on their annuity due to a declining financial index.

The company press release gives an example of someone who purchases a $100,000 annuity with the Enhanced Lifetime Income Benefit.  By waiting ten years before taking withdrawals, the 8% increase would give this person a $180,000 income base instead of the $100,000.  Monthly payments vary based on the other options associated with the annuity, such as whether it is a lifetime income annuity or a death benefit annuity, but you could receive up to 7% annually from this fixed indexed annuity.

Written by Rachel Summit

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