Living Long, Living Well
The reason for the increase in annuity products is multifaceted. Not only is a drove of baby boomers set to retire, many of them without adequate retirement assets, the current crop of boomers are retiring at a time when investment markets are producing few gains and many losses. Enter annuities, which a recent Wharton Financial Institutions Center study co-sponsored by New York Life Insurance Co. found could produce a lifelong cash stream for investors at a cost that is as much as 40% less than a traditional portfolio of stocks, bonds and cash. That means an investor at age 65 can guarantee that same income with $600,000 that a neighbor may need $1 million to produce with stocks, bonds and cash – and without the guarantee. For actual payouts read on.
Income annuities can also be critical to mitigate the risks of longevity, says the study’s co-author David F. Babbel, an insurance and risk-management professor at the Wharton School. While “on average” half the population lives until 85, half of those who make it past age 65 will live beyond the age of 85. And all of those people who live past 85 have a chance to live past 100, and they are going to need income, Babbel says. That is where sound income planning, especially the concept of income annuities with longevity features, can be so beneficial, he adds. Since they guarantee income for life, the investor sidesteps the risk of unfortunate investment decisions, poor performing markets and running out of money.
More food for thought.