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New York Life Sells $1B of Deferred Income Annuities


The Wall Street Journal’s MarketWatch recently published an article by Anne Tergesen stating that “More boomers (are) buying ‘longevity’ annuities.”  While immediate annuities are still a popular choice for retirees, some younger Baby Boomers are purchasing deferred annuities as early as their 50’s, even though they won’t start receiving payments for another decade or so.  Last year the government made it easier for 401k plans to offer annuities because they believe that annuities are a good way to safeguard one’s retirement.  The purchase of a deferred income annuity helps create a personal pension, something many Baby Boomers are no longer receiving from their jobs.

The longer you wait to start receiving payments from your deferred annuity, the more you get annually in payouts.  Some advisors recommend purchasing longevity annuities that don’t pay you out until you turn 80 or 85.  Your payments will be way higher, but obviously there is a chance you won’t live that long.  That is why these products are referred to as longevity insurance, insurance against outliving your savings.  If you do happen to live near 100, you are insured against running out of money to pay your bills.  One extreme example is that if a 65 year old man were to spend $100,000 on an immediate fixed annuity today, he would receive $7,000 a year for life.  If he deferred receiving payments until age 85, he would get $60,000 yearly.

New York Life Insurance Co. sells the most deferred income annuities of anyone out there, accounting for 86% of the sales last year.  In 2010, their Guaranteed Future Income Annuity had sales of $50 million.  They’ve just announced that 2012’s sales exceeded $1 billion!  That’s quite an increase in the past couple of years.  New York Life says that the average buyer for their top deferred income annuity is age 58 and plans to start receiving payments no earlier than age 67.  The sooner you receive payments, the less they will be, but payments that are deferred will innately be higher than those of an immediate annuity.

Last week in summarizing LIMRA’s 2012 sales figures, we mentioned that deferred income annuities accounted for only 1% of total annuity sales, but saw the largest sales increase of annuity products.  While New York Life sells the most deferred income annuities, a lot of other insurers are offering these popular longevity products as well.  MassMutual and Northwestern Mutual have new products out there.  And just this year, American General Life Companies and Guardian Insurance & Annuity Co. have also introduced these annuities.  For those worried about death benefits or inflation, you can make sure to account for those things with different riders, but they will lower your annuity payouts.

Written by Rachel Summit

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