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Retirement Planning > Spending in Retirement > Income Planning

Carriers Continue Income Planning War

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The Social Security Trustees today helped promote U.S. life insurers’ new annuity guarantee products.

The trustees released a new report predicting that the Social Security trust funds will empty out in 2040, when the oldest boomers are 94 but the youngest are just 76. A year ago, the trustees were predicting the trust funds might hold out until 2041.

Meanwhile, experts say many U.S. baby boomers could have a difficult time making ends meet during their later years even if the Social Security and Medicare trust funds stay solvent until all boomers pass on.

“With Americans living longer than ever and many failing to save adequately for retirement, one of the greatest risks they face is the possibility of outliving their money,” Mark Schwarzmann, an annuities executive at a distribution unit of Ameriprise Financial Inc., Minneapolis, says in a statement about the income planning crisis.

Ameriprise’s RiverSource arm today introduced one product promoted as a tool for maintaining a steady stream of retirement income: the Guarantor Withdrawal Benefit for Life variable annuity rider.

The rider will give retirement savers the ability to withdraw up to 7% of their benefit amount every year, which will provide guaranteed income for 14 years.

Retirees who want to receive lifetime income can start withdrawing 6% of their benefit amount, or annual lifetime payment, every year beginning at age 65.

The Ameriprise RiverSource unit is charging an additional fee of 0.65 percentage points for the guaranteed withdrawal benefit rider.

Ameriprise says it will start by marketing the withdrawal guarantee rider through banks and independent broker-dealers. The company plans to make the rider available through its own financial advisors sometime this summer.

Other companies introducing annuity-based income planning products today include Jackson National Life Insurance Company, Lansing, Mich., a unit of Prudential P.L.C., London, and the Wellesley, Mass-based U.S. subsidiary of Sun Life Financial Inc., Toronto.

- Jackson National has replaced the LifeGuard 4 and LifeGuard 5 guaranteed minimum withdrawal benefit options for its Perspective variable annuities with 5 new GWMB options, including 2 options designed for married couples.

The 2 options aimed at couples will continue benefits for the surviving widow or widower if 1 spouse dies, Jackson National says.

The new options include the LifeGuard Protector option, which provides automatic, annual step-ups for the first 10 contract years, and an owner-initiated step-up option in later years; the LifeGuard Protector Plus option, which provides a 5% benefit increase in the first 10 contract years if no withdrawals are taken and a step-up option at 5-year intervals; and the LifeGuard Protector Advantage option, which offers a 5% benefit increase for the first 10 contract years if no withdrawals are taken, or automatic annual step-ups for the first 10 contract years and an owner-initiated step-up option in later years.

The Lifeguard Protector and Lifeguard Protector Plus options are available in joint versions designed for married couples.

The minimum initial issue age for the new options is 45, and an owner can get guaranteed income for life on the contract anniversary immediately following the owner’s 65th birthday.

- Sun Life has started selling the Secured Returns for Life Plus option with its Masters variable annuity product line.

The Sun Life option offers a new step-up program along with a program that awards clients annual bonuses for deferring income.

The step-up programs, which now work either by choice or by pre-set schedule, give customers the ability to lock in any increase in their account values as often as every 3 years.

The income deferral bonus program lets customers increase guaranteed withdrawal amounts by 5% of their principal or the stepped-up amount, whichever is greater, for each year withdrawals are deferred during the first 10 contract years.

Of course, the insurance companies that issue the variable annuities and VA options are responsible for backing the product guarantees.


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