Advisors are working with clients starting at an earlier age so they can take advantage of variable annuities with the guaranteed living benefit riders. They remain sought after and among the most poular products industry-wide, but benefits may not be as rich as they once were, according to a life insurance executive from Lincoln Financial Group.
Working with clients in the 55 to 60 year-old range, or the five years before retirement, provides a build-up for the living benefits, according to Dan Herr, Vice President of product research & development for retirement solutions at Lincoln Financial, Radnor, PA. After that, on the brink of retirement, or in it, there is not as much leverage, he says.
These products are dominating the marketplace with about 90% of sales volume in dollars had guaranteed living benefit (GLB) riders offers, according to LIMRA.
LIMRA also noted that 88% of consumers elected a GLB rider (when offered/available) with their VA contract in the third quarter 2011.
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Lincoln’s guaranteed income benefit product where payout payments can fluctuate with the performance of the market but never go below a certain rate has done very well over recent years, Herr says.
However, to compensate for the continued low interest rate environment and still attract happy consumers is a tough balance.
We’ve reached the point where you just can’t keep raising the fees, Herr said. The company has to manage the risk or make the benefits less rich than they had been, he noted.
“There’s a point where you can’t just keep raising the price,” he said, and you look at the risk and manage the cost of hedging that risk, he said.