Shopping for Lifetime Income Benefits
All lifetime income benefits are not created equal, so shop around – with the help of a qualified financial professional you trust. The process involves three steps:
Step 2: Evaluate the Quality of the Base Annuity Contract
- Look for any outstanding annuity plan features and benefits apart from the lifetime income benefit, such as long term care coverage or enhanced death and estate benefits/guarantees.
- Look for competitive annuitization factors and actuarial tables during the contract’s payout phase. This often translates into a larger lifetime income stream if you annuitize, for up to two people (husband and wife).
- Examine MEA fees (management, expense, and administration). Again, keep in mind that the MEA fee does not always correlate the quality of the annuity guarantees.
- Look for an annuity plan whose investment subaccounts and asset allocation models show strong historical returns and effective risk management.
- Look for a plan that offer a wide selection of subaccount investment options and models to meet the full range of investor needs and profiles, from conservative to aggressive, hands-on to hands-off. For example, turnkey asset allocation models can be well suited to hands-off investors, while the ability to actively rebalance and invest outside a model caters more to hands-on types. Be sure to check whether the rider has investment restrictions that restrict you to only certain sub-accounts or asset allocation models.
- What’s the surrender period? For maximum flexibility, we generally favor annuities with surrender periods of eight years or less. In every case, only purchase an annuity with a surrender period consistent with your retirement time horizons.
- Look for plans with generous penalty-free withdrawal provisions.