The Message At NAVA: Get Ready For Income Planning
Variable annuity insurers should focus on promoting the VAs ability to “provide lifetime income or avoidance of lump sum poverty,” said Jane Mancini, the new chair of the National Association for Variable Annuities at the groups annual meeting here.
The industry should not be ashamed of selling VAs, said Mancini, a consultant and VA expert, because the product offers consumers protections against both mortality and market risks.
By contrast, she said, in the last three years, systematic withdrawal (commonly used to remove money from mutual funds on a regular basis) has turned out to be “like dollar cost averaging in reverseconsumers bought high and sold low.”
The industry needs to concentrate on educating consumers about the benefits of the annuitys lifetime payout features, she stressed. It also needs to spur consumers to support the proposed Lifetime Annuity Payout legislation that would give capital gains tax treatment to the annuitys inside buildup, when the consumer opts for lifetime payout.
NAVA already is moving this way, she noted, and has joined a new Annuity Coalition that is supporting legislation encouraging annuitization. It will, said Mancini, “incent investors to elect the lifetime annuity payout and receive a retirement income stream they cannot outlive.”
The lifetime payout issue “is not about insurance companies or producers,” said Mark Mackey, president and CEO of NAVA, during his opening remarks. “This is a major public policy problem.”
Many Americans no longer have defined benefit pension plans, he pointed out. As a result of this and any other financial trends, “many Americans stand a real chance of outliving their assets.”
NAVA is partnering with InFRE, Lubbock, Texas, to develop a training course for advisors in income planning, Mackey pointed out. InFRE is a nonprofit foundation that provides retirement education programs for professionals.
NAVA is doing this because it believes “people should seek professional advice when planning for retirement,” said Mackey. “It is not a job for financial novices.”
Another recent NAVA initiativea report on breakeven holding periods of VAs in comparison to mutual funds postshows “annuities are still attractive for long-term savers, especially when electing annuitization,” added Mackey. (Prepared by Price Coopers Waterhouse, the report was commissioned by NAVA and distributed at the annual meeting).
Jon Boscia, Lincoln Financial Group chairman and CEO, said a key retirement problem is that the definition of retirement is changing. Boomers are living longer than previous generations, they are healthier and they are eating better, he noted. Many will live 20 to 30 years after retirement, but they have a lot of self-reliance and dont want to depend on their children.