New research by Cannex found that annuities with withdrawal guarantees are competing with income annuities, and that, when comparing which type of annuity will provide the highest guaranteed income in retirement, it depends on a number of factors.
According to the research, different types of annuities with equivalent benefits provide higher income guarantees depending on when income is taken, the gender of the policyholder and whether it is for a single person or a couple.
The study, Guaranteed Income Across Annuity Products: Withdrawal Guarantees Compete with Income Annuities, compared income from four types of annuities — single premium immediate annuities, deferred income annuities (DIAs), variable annuities and fixed indexed annuities (FIAs).
The study found that SPIAs provide the highest income guarantee for those planning on drawing immediate income.
For a couple of different ages, the study found that a variable annuity with guaranteed income may generate the highest annual payments.
For an individual looking to start drawing down money in five or 10 years, the research shows a fixed indexed annuity provides a greater guaranteed stream of income than either a deferred income annuity or variable annuity.
For women, the differential between a fixed indexed annuity and a deferred income annuity is even greater because DIA benefit payments are lower based on longevity expectations, the report explains.
The longer the delay in taking income, the greater the benefit for women of choosing an FIA versus a DIA.
“Based on a $100,000 premium investment in a DIA at 65 years old, a woman of average projected longevity would receive, after 10 years deferral, around $11,700 in annual income, versus approximately $12,900 for a man,” the report states.
By contrast, an FIA could generate as much as $14,313 of annual income regardless of gender, the report states.