Boomer and Retirement Weekly Reader – Variable Annuity Edition

Baby boomers are understandably fearful of another market meltdown. They continue their search for investments that will provide retirement income security with preservation of capital. That’s hard to achieve in a single package.

Sellers of fixed and variable annuities are trying to exploit the fear and fill the gap. They are having to develop new annuity products with novel features. At the same time, these new products have to include protection for the insurance companies against another market hit like they experienced in 2008. In other words, the annuity sellers need to make more money. This means that they will be building more protections (for them) into the annuity products against downside risk.

One example of such a new product is the AnnuityNote variable annuity from John Hancock. There are some good features in this product, such as guaranteed for life annual withdrawals beginning after five years. The guaranteed amount is 5% of your initial contribution or 5% of the contract value of the annuity at the end of five years. Also, you can make withdrawals from the contract value at any time without a surrender charge.  Any contract value remaining at your death passes to your beneficiary.

The downside are the fees: a 3% front end sales charge plus an annual expense charge of 1.99%. Then there’s that little inflation problem that slowly but surely eats away at the spending power of those 5% withdrawal payments.

But I can see why these products are appealing to many people.

Here are some a fews items I read this week that you may like:

The IRS announced that contribution limits for 401(k) plans, IRAs and other qualified retirement plans will not be increased for 2010. This is unfortunate but reflects that reality that the cost of living formula used by the government does not fully reflect the actual cost of living. They could at least let us over-50 folks contribute more!

Long term care insurance continues to an enigma. We now have it but some insurers are taking heat for their huge premium increases for existing policy holders. This just adds fuel to the fire of belief that the insurance companies are deliberately underpricing the policies at the front end to get folks to sign on. Is it any wonder that no one trusts insurance companies in the health care debate?

The Department of Energy’s energy savings blog published a comprehensive round-up of prior posts covering all aspects of saving money on energy use this winter.

Retirement Revised offers a short summary of expert tips on how to transition from a corporate environment to a finding job in the non-profit sector.

At my Tough Money Love blog, I wrote a follow-up to the hard truth about stocks for retirement investors and at my Failsafe Retirement blog, check out this update on developments for TIPS and I-Bonds.

Don’t overlook this week’s Carnival of Personal Finance.

Enjoy the rest of your weekend.

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1. Boomer and Retirement Weekly Reader – Fall Colors Edition
2. Boomer and Retirement Weekly Reader – Boats Out of Water Edition
3. Vanguard Enters the Guaranteed Lifetime Income Space