Cathy Weatherford strode into the meeting room like a woman in a hurry and on a mission. That’s not surprising, considering her job is to spread the word about retirement options to an increasingly apprehensive public. Specifically, she wants to educate consumers, financial advisors and regulators about the importance of annuities in what she calls a “holistic” retirement plan.
And she is uniquely qualified to lead that charge. Weatherford is president and CEO of the Insured Retirement Institute (IRI), a position she has held since 2008. The Washington, D.C.-based nonprofit group advocates for proper retirement strategies and the use of annuities and variable life products in those plans.
But before she came to IRI Weatherford was no stranger to the insurance industry, after having served as CEO of the National Association of Insurance Commissioners and the first woman to head Oklahoma’s insurance commission.
LifeHealthPro.com caught up with Weatherford as she presided over the organization’s 2012 Marketing Summit in New York City in early April.
In the first part of the conversation, Weatherford discusses why annuities are gaining in popularity, how they can fit into an individual’s retirement blueprint, and how insurers are managing risk in today’s volatile market.
LHP: How do annuities fit into an overall retirement plan?
Cathy Weatherford: We have millions of Americans who suffered tremendous losses in their retirement portfolios in the economic downturn. After years and years of thinking, oh, these markets are always going to go up, they now have an acute awareness and knowledge that markets do go down, and we are going to have ongoing volatility in the marketplace. So what are people looking for? They are looking for guarantees. And they are looking for the ability, as I call it, to dip their toes back into the waters of market exposure, but protected against downside risks. I think that’s exactly why people are gravitating to variable annuities as a part of their holistic retirement plan.
People think, “I now have a foundation here, and with the living benefit riders I know I have guaranteed income in retirement. I’ve got a bit of exposure to the marketplace, protection against downside risk, and oh, by the way, this product also gives me that lifetime income piece that I so greatly need in retirement.”
LHP: But you mentioned annuities as a part of a retirement plan. So you wouldn’t tell a retiree or pre-retiree to put everything into an annuity? What other planning or financial vehicles should they use?
Weatherford: Absolutely not. Here’s what the analysis has to be and it’s an individual decision for every working American as they prepare for retirement. One, you evaluate what your fixed needs are in retirement that absolutely need to be covered. You have Social Security, but do you have a 401(k) pension plan? First and foremost, we tell everyone who has a workplace plan, if you’re a saver, save there first; it’s the only free money left. You’re going to get a matchwell, most people get matches. But you are going to get your match. That’s where you need to put your money if you have that. But remember, 50 percent of all Americans don’t have a workplace retirement plan. And so for those an annuity may be an option to provide for their own personal pension.
So you evaluate your fixed needs in retirement. And I believe that’s where an annuity can come in because Social Security is not going to cover fixed expenses for the majority of Americans in retirement. So an annuity can be that key piece that lays that foundation to get lifetime income that takes care of those fixed expenses.