Annuities are misunderstood by many people. This can be blamed partly on a few unethical advisors and also on a lack of information available to consumers. John Morgan recently wrote about one of Stan Haithcock’s Marketwatch articles for Money News. In “Marketwatch: Longevity Annuities Have Come of Age for US Consumers,” we learn more about the big changes to the industry that occurred on July 1. There is great potential to create long term income with longevity annuities, especially after the Treasury Department and the IRS changed the rules for using QLAC’s in 401k’s and IRA’s. It’s been about ten years since Qualified Longevity Annuity contracts were introduced. They are a simple way to create a lifetime income stream that starts at some point in the future. As a no fee product, you would think that consumers and the financial industry would have shown great interest in QLAC’s, but that has not been the case.
Mr. Haithcock believes that this July 1 ruling could be a turning point for the entire annuity industry. One reason that QLAC’s haven’t been extremely popular despite their benefits is that agents are not paid high commissions on the products. Unfortunately some agents sell annuities based on their own greed rather than the benefits they can offer consumers. QLAC’s are valuable to consumers because of their transparency. Their proposals show contractual guarantees so you will know exactly what these longevity annuities can offer in your retirement accounts. By using QLAC’s in a 401k or IRA account, you will know how much income your account will generate in the future. While indexed and variable annuities have the potential to offer a greater return, only a portion of your return is guaranteed. Those who prefer concrete numbers are comfortable with the contractual guarantees of longevity annuities.
The new ruling does put a limit on the amount of your 401k or IRA savings that can be used to buy a QLAC. Mr. Haithcock thinks that the current $125,000 or 25% limit will be raised as more retirees use this option in their retirement planning. Longevity annuities are simple and efficient, according to these financial experts. When you show people such a great option, they realize that this is exactly what they didn’t know they were looking for. Retirees are comfortable when they know the amount of income that they will have to spend for the rest of their life. It can be uneasy when you are trying to spend down your savings but have no idea how long you will need to use the money. Many economists and other financial experts recommend using a portion of your money to buy a fixed annuity to fund retirement. Longevity annuities can be immediate or deferred. They can also pay you income for the rest of your life or for a specific number of years. Contact an expert at Annuity FYI if you have any questions about the benefits of longevity annuities.