Insurance companies have pushed hard to sell variable annuities with guaranteed lifetime income riders. These products were attractive to baby boomers who were attempting to build their own “pension.” Sadly, many of these same insurance companies are trying to undo and undercut the vary products that they sold. A recent case in point: Prudential.
Single premium immediate annuities have become more popular as a tool for generating lifetime retirement income. However, immediate annuities are insurance policies that do not make sense for everyone, despite the appeal of having income security. Two circumstances come to mind when you should probably not buy one.
Many retirees are turning to annuities to provide income and/or growth with no downside risk. Let’s forget for the moment the costs and other problems associated with variable annuities in particular. The question I want to briefly address is – assuming that an annuity is part of your retirement planning – whether you should wait to purchase one.
Lots of insurance companies sell variable annuities. Because the fees are high, they make a lot of money in the process. Baby boomers who are approaching retirement are a huge market for annuity companies. However, a lot of us have been (finally) educated about the negative aspects of variable annuities and have resisted buying. Then came the Guaranteed Lifetime Withdrawal Benefit (GLWB) rider. This changed the annuity landscape.
Annuities in general are difficult for the average baby boomer to fully understand. It doesn’t help that different stakeholders in the annuity industry have different stories to tell about the features, benefits, and costs. Read more
If you are considering a lump investing strategy when you retire, a life income annuity is surely on your list of options. I’ll bet every baby boomer without a pension and with money saved is considering annuities. There is so much to know and read about the costs, risks and benefits of annuities. Insurance companies are scrambling to introduce new annuity products with new and different features. Salesmen are being trained to explain them to confused retirees. Whom do you trust to know whether you should buy an annuity with a lump sum investment?
A frequent objection to the purchase of long term care insurance is that years of premiums may be wasted if long term care is never needed. Similarly, many prospective retirees are reluctant to invest in an immediate annuity because of a concern that they will die long before receiving a meaningful amount of annuity income. Insurance companies are now introducing products that are designed to address these purchaser concerns. One of the products is called a hybrid annuity with a long term care benefit or rider. Similar products are called long term care annuities. Read more
Many boomers are considering buying immediate annuities to provide a supplemental retirement income stream that is guaranteed to last for life, assuming that the insurance company remains solvent. Unfortunately for some annuity purchasers, taxation of annuity income is going to increase. Read more
I have thought and written extensively about the benefits, costs, and risks of immediate and variable annuities for retirement. Now even the White House is suggesting that more boomers consider using annuities to provide lifetime retirement income. Read more
There is a transformation of sorts occurring in the annuity market. Some of the large sellers of annuities to baby boomers and retirees are introducing new annuity products that are simplified and/or that offer new features. Let’s look briefly at a couple of these new types of annuities. Read more