Americans are looking for ways to ensure they won’t outlive their income in retirement, said New York Life, and as a result are driving sales higher for its Guaranteed Future Income (GFI) deferred income annuity.
Sales of GFI have totaled more than $2 billion since the company introduced it in July of 2011, and 10 other insurance carriers have introduced similar products since its inception. In addition, 20 percent of GFI policyholders have contributed more than one premium payment.
GFI gives policyholders the option to determine an income start date in the future for guaranteed payments that will continue for life. Between the time they make their initial premium payment and the date that income actually starts, they can make additional premium payments to increase the amount of income they will receive in the future. They can also move the income start date up or back, depending on their situations.
About 70 percent of those who buy GFI use tax-qualified funds — money they’ve already set aside in IRAs or 401(k)s — to fund policy purchases. While GFI is geared toward preretirees between the ages of 55 and 65 who are planning to retire within the next five to 10 years, there is enough flexibility in the design that it can be used in a range of ways.
Use of the policy can reduce some market risk in policyholders’ overall portfolios as they get closer to retirement, and also offers the potential of higher guaranteed income payments at retirement than are available from other sources.
“As preretirees plan for retirements that may last 20, 30, or even 40 years, there is growing recognition of the value of a guaranteed, sustainable approach to income. One of the most efficient ways to do that is with a deferred income annuity,” said David Cruz, senior managing director in charge of the company’s annuity products, in a statement.
“As sales continue to grow and other insurers enter this market, we expect to see an increasing proportion of preretirees — of which there are more than 45 million — seeking pension-like income, guaranteed by highly rated insurers.”