Intensify Annuity Development As The Social Security Debate Unfolds

Intensify Annuity Development

As The Social Security Debate Unfolds

Social Security reform appears to be the latest neocon idea, and its catch phrase is “personal retirement accounts.” Annuities are, or should be, in the thick of it.

“Neocon” is a term that has been around since the 1950s. It refers to people who are said to believe that ideas rule the world and that the way an idea is presented (imagery) is just as important as the idea itself. (An example: Neocons had elaborate ideas about economics in the early 1980s, but these ideas didnt take off until the neocons came up with the imaginative phrase “supply-side economics.” Once that term took hold, the ideas became part of government policy.)

In the Social Security debate, the neocon idea appears to be personal retirement accounts. The discussion centers on a probably irrefutable argument that 2 or 3 workers (as opposed to 18 long ago) cannot be expected to support 1 retiree in a compulsory transfer-of-income scheme.

However, the insurance industrys people (not the neocons) are the real experts on annuities and security plans. Therefore, in any Social Security reform effort that takes place, the industry must not hide in its castle until the business is wrecked. Its leaders must believe, and insist, that the industry have a role in the rebuilding ahead.

If it plays its role properly, it will help secure the future of the annuity business and also of the retirees of this country in immeasurable ways.

It is said that personal retirement accounts will weaken our sales of permanent plans and annuities. But will they? If so, the industry will need to do its homework and develop the facts and figures that make its case irrefutable.

Maybe those personal retirement accounts will be an inevitable development anyway. If that proves to be the case, then the industry can turn the arrival of these accounts to its ownand its customersadvantage. How? By pointing outand, again, provingthat personal retirement accounts are never going to be adequate as a source of retirement income.

These products, whatever form they may take, will always need a lot of supplementingby 401(k)s, IRAs, 501(c)3s, and other qualified retirement plans. (Significantly, the new neocons support the supplementation idea, too.)

In the process of promoting the supplemental role that annuities can play, perhaps the industry can even launch a push to fix all those aggravating rules that hinder present annuity efforts. For example, many rules today do not allow for proper treatment of executives in the area of retirement plans. Im referring here to the various nondiscrimination rules; these rules are so convoluted that they seem repressive, especially for the smaller companies.