Rollover IRA From Principal Targets Boomers' Income Needs

Also at time of purchase, the client chooses a “secure retirement age”–up to 15 years from date of plan purchase. This is the age at which the owner starts receiving income payments that are fully secure from market risk, says Denning. These payments are secure because all the money now comes out of the annuity side of the product.

(Note: The brokerage side of the product is no longer a factor because all its funds have been spent on the immediate annuity purchases.)

Owners can make other choices at time of program setup, too. They can elect to purchase several options, for example. These include: a survivor income benefit, caregiver income benefit, a legacy income benefit, a cost-of-living adjustment, and a liquidity reserve account.

There is a lot of post-issue flexibility, as well, says Danilson. Examples include:

“Owners can start and stop the target income payments at will,” says Denning.
Owners can change the “transition period,” he says. This is the period between date of plan purchase and the secure retirement age. To shorten or lengthen this period, the owner changes his or her secure retirement age election. Example: If a 63-year-old initially chooses age 78, he could change his selected age to, say, 70, thus trimming the transition period from 15 to seven years.
Owners can change their mutual fund choices and also their asset allocation mode, says Danilson.
Owners can withdraw funds from the brokerage account “at any point in time, with no front load, no back load and no surrender charge,” says Denning.
If owners elect the survivor or legacy benefits, “they can sell the benefits back to us later on and well put the value into the annuity,” says Denning.
Owners can put the plan on autopilot or they can take control by deciding what changes to do and when, says Danilson.

Principal provides statistical and graphical illustrations to help clients make plan decisions, the executives add. These show the monthly target income, the target income range after year one and related details. They also show the probability that the secure monthly income will be in excess of the target income.

The probabilities are not guarantees, Danilson stresses. “Our purpose is to use Monte Carlo simulations to give clients a directional sense of where their reasonable level of income will be.”

The IRA uses RetireMentor, an income planning and management system developed by Golden Retirement Resources Inc., to help clients design their plan.

Approved in 46 states, the IRA is being sold through Principals telephone counselors and its proprietary registered representative field force. Producer compensation is comparable to that of a wrap fee plan using mutual funds, says Denning. The rep also gets a commission for each slice of the immediate annuity purchased.

Baby boomers face a dramatically different retirement experience than their parents, observes Danilson, alluding to anticipated longer life expectancies, earlier retirement ages and declining guaranteed forms of retirement income. To cope, boomers want “flexibility, control and a guarantee that they wont outlive their savings,” he says. The new IRA program is targeting those needs.

Reproduced from National Underwriter Edition, March 17, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.