From the May 2006 issue of Boomer Market Advisor • Subscribe!

Variable products for boomer women

Longer lifespans and greater financial independence mean boomer women require, and demand, unique saving and investment strategies from the companies and advisors they work with. Carriers are responding with new products and educational material tailored to the unique issues this demographic will face in retirement.

Studies show that the latter -- educational material -- is sorely needed. Almost 90 percent of female respondents to a Prudential Financial survey indicated they have sole or joint responsibility for investment, annuity and life insurance products. Yet, they also said they want more education on financial matters -- with nearly 80 percent indicating that knowledge could potentially improve their financial outlook -- and financial professionals are their preferred source.

An ING study conducted last fall supports these findings. Nearly half of the baby boomers surveyed who earn more than $50,000 a year are open to the benefits offered by annuities. Boomer women were particularly interested, with 60 percent agreeing with the statement "protecting my retirement savings from loss is important, but I also want to be able to grow my savings."

Recognizing that a lack of product knowledge means many boomer women find the sorting and buying process intimidating, ING released ING Simplicity, which the company says streamlines almost every key aspect of a variable annuity and "combines built-in benefits into a simply packaged approach and product."

In order to address the fact that women generally outlive men and run a greater risk of financial peril, another carrier, The Guardian Insurance and Annuity Co., recently released two new living benefit riders for its variable products. Both Spousal AssetAccess and Lifetime AssetAccess are meant to help clients -- and client's spouses -- supplement lifetime income.

"We commissioned a study, and one of the findings was that annuity living benefit riders are significantly more popular with non-married women than with married women," says Bruce Long, president of The Guardian. "We saw this as an underserved market. The spousal need in the annuity arrangement was left uncovered."

Spousal AssetAccess, says Long, is one of the few guaranteed minimum withdrawal benefits that extend the guarantee to a spouse. The rider allows withdrawals to be made or guaranteed payments to be received as long as either spouse is alive. In November, AXA Equitable introduced two new living benefit options, as well. Both are designed to address the longevity and income issues clients face, and are indicative of the types of features annuity carriers are now offering.

According to the company, its "benefit base reset" allows a five-year step-up of the value of both the GMIB and guaranteed minimum death benefit so the client can take advantage of market appreciation. This allows him to lock in increases to his benefit over and above the rollup guaranteed by the GMIB. This higher amount then continues to accrue at a guaranteed percentage rate.

In addition, the no-lapse guarantee in the company's GMIB means that no matter how poorly the market performs, if the accumulated account value falls to zero, the GMIB will automatically kick in, providing a needed income stream for the client.

Last January, AXA also introduced its Retirement Income for Life variable annuity. The company says it's meant to bridge the gap between the accumulation of wealth and distribution of payments. More specifically, the variable contract itself provides many of the features that would normally require separate, additional living benefits to be purchased.

"It is believed to be the first stand-alone product to offer access to account value, growth potential and a ratcheted income base," says Bob Goldenberg, AXA's vice president of annuity marketing and product development. "[It offers] the ability both to add money to the contract before withdrawals begin and to pass unused values to heirs."

The National Association for Variable Annuities reported a 50 percent decrease in variable annuity net flows in 2005, and Notice 05-50 continues to cause more chaos than guidance in the equity-indexed space. For advisors looking for new areas of growth in the variable space, boomer women represent an obvious, and critical, target market -- and customized tools are increasingly available to better address their underserved needs.

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