Deferred income annuities have been selling in record numbers this year. Bank Investment Consultant’s Margarida Correia tells us why in “Deferred Income Annuities Gain Traction, Following Rebirth.” The products were called advanced life deferred annuities when first introduced, but did not take off in the marketplace. After a few changes recently, an IRI report predicts that DIAs will be have the fastest growth in sales of any annuity product. Old products had deferred time frames of 20-40 years, but the new products can start as early as 2 years from purchase date. Death benefits and more liquidity options are another reason for the surge in sales. The average person buying a deferred income annuity is in their late 50’s. Although DIAs still account for only 1% of total annuity sales, the strong growth indicates continued sales increases and a greater percentage of the market share in the future.
The Annuity FYI website has recently been updated with new information about deferred income annuities. You can also find a summary of the best DIA products available on the market right now. Deferred income annuities are sometimes known as longevity annuities and they guarantee you lifetime income payments after your initial lump sum premium payment. Some products allow you to add more money to your premium at a later date; others do not. At the time that you set up your annuity contract, you determine at what date you want to start receiving your income in the future, in some cases up to 40 years from now. These deferred income annuities are similar to immediate annuities in many facets, other than the fact that you don’t start receiving income right away.
Your payouts with deferred income annuities are much higher than those with an immediate annuity. For example, a 60-year old purchasing a $100,000 deferred income annuity that starts payments when they are 80 would get payments of $42,000 a year. He would get returns of $630,000 if he lived to be 95 years old. If instead, the same man conservatively invested the $100,000 at age 60, he would have around $180,000 with which to purchase an immediate annuity at age 80. That purchase would get him $18,000 a year in income payments, for a total of $270,000 in income between the ages of 80 and 95. Keep in mind that deferred income annuities are not liquid investments, although some products offer liquidity options.
With the higher payments offered and the guaranteed lifetime income, deferred income annuities are popular products right now. There are also optional benefits that you can add to make your annuity even more attractive. You can add death benefits and even a fixed or variable income increase to help combat inflation. There are payout options in addition to just the lifetime option as well. Each added benefit comes with an added fee of course. The following six deferred income annuities are Annuity FYI’s top picks right now.
- MetLife’s Longevity Income Guarantee has two different options depending on your goals. If you’re looking for flexibility, their Flexible Access offers a flexible payout date, death benefits and some liquidity. If your goal is to maximize your income, the Maximum Income Version increases your payments, but doesn’t offer death benefits or liquidity.
- Prudential’s Defined Income Variable Annuity offers a 5.5% growth rate compounded annually. This variable annuity functions similarly to the other products recommended and offers liquidity to investors as well.
- New York Life’s Guaranteed Future Income Annuity gives you the option to change your start date for receiving payments, offers an option to increase your payments annually, and also has a payment acceleration option. Three different times, you can get six months worth of payments at the same time.
- American General Life Companies’ Future Income Achiever Annuity gives multiple death benefit options, allows you to receive accelerated payments twice, and has many different options to increase your payments. You can even tie them to the Consumer Price Index.
- Symetra Retirement Benefit Life’s Freedom Income Annuity gives great optional inflation-protection features and many death benefit options. Some payments can increase by up to 6.5%, compared to the 3% increases offered by many other products.
- Guardian’s Secure Feature Income Annuity has payment increase options unique from the others. While your beginning payments are lower, they increase between 1-5% each year. They also have many different payout options that help protect your initial investment.
When you are comparing deferred income annuity products, look at both the details of the annuity and the company selling them. For the annuity, you need to know the options for inflation protection, death benefits, liquidity, and adding on additional contributions after your initial payment. When looking for a company, make sure they have high financial strength ratings, good customer service, easy account access, and strong company management. Our experts would be happy to help you if you have any further questions about deferred income annuities.
Written by Rachel Summit