The Obama administration is a big fan of annuities, according to “The unloved annuity gets a big hug from the president,” by Ron Leiber of The Boston Globe. While President Obama did not end up discussing annuities in his State of the Union address last week, they are widely discussed in a report from his Middle Class Task Force. Obama’s administration is promoting annuities as a vehicle to help Americans obtain a secure retirement. In exchange for a lump sum of money at purchase, investors will receive a monthly income check for the rest of their lives. Annuities are one of the few products to counter the longevity risk, running out of money while you are living.
The investors who were previously fearful of the risks of annuities may just take a second look at this unique product. An immediate fixed annuity is the simplest form and the least “risky” from many viewpoints. Variable annuities were derived from them and have their own risks and rewards. Maybe the biggest fear investors had was losing the money if they died unexpectedly. There are options available to add a spouse or other loved one onto your annuity to receive payments for a specified period of time if you die. Inflation was another risk that worried investors, but with the option to purchase an annuity that rises with the consumer price index, you can avoid that as well. President Obama may be issuing tax incentives for investors to purchase annuities for retirement along with requiring plan administrators to show employees the monthly payments they could receive with annuities to help promote them even more.