Concerns by insurance regulators, federal and state, regarding equity-indexed annuities certainly seem to have taken center stage over the past few months.
These issues have focused on deferred annuities.
It’s time to engage in serious discussion regarding solutions to pressing market needs relating to sound income-oriented products. Consumers at or near retirement age and the insurance companies that service their needs continue to look for useful and affordable solutions.
In this regard, equity-indexed product attributes are worthy of incorporation into retirement income offerings. And, while we are not attorneys and don’t offer tax advice, we believe the designs may avoid some of the controversial issues currently roiling the equity-indexed product segment of the industry.
Without going into a full-fledged discussion of retirement income product objectives, here are some critical objectives that an offering should appropriately address:
1. Consumers want an asset that is at least to some degree liquid.
2. Consumers want investments that will appreciate over time to cover increased costs.
3. Consumers want vehicles that provide protection against certain contingencies.
Equity-indexed immediate annuities can address these attributes very nicely.
For example, these offerings may be able to keep up with increased living costs. Although the link between items such as medical costs and investment-related returns is by no means perfectly correlated, an equity-indexed immediate annuity offers the potential for increased payments, either over time, or significantly immediately.