Displaying items by tag: retirement

TIAA, a provider of lifetime financial solutions, has unveiled a new gauge aimed at showcasing the potential income augmentation for recent retirees who integrate an annuity strategy into their financial plans, in contrast to solely adhering to the 4% rule. The TIAA Annuity Paycheck Advantage gives retirees an idea of how their retirement package might differ with annuities rather than the strict 4% rule. 

According to TIAA's calculations, a 67-year-old retiree in 2024 could potentially witness a 32% upsurge in their initial retirement income by designating a third of their savings to lifetime income through the TIAA Traditional annuity, coupled with a 10-year guarantee period and withdrawing 4% from the remainder. Kourtney Gibson, TIAA's chief institutional client officer, described the TIAA Annuity Paycheck Advantage as a guiding principle for new retirees, offering the promise of elevated guaranteed payouts and heightened certainty regarding retirement expenditures. 

TIAA intends to annually revise its Annuity Paycheck Advantage index to reflect the contemporary influence of lifetime income on the financial well-being of Americans.

Finsum: While the 4% rule can be a good benchmark, a slightly more complicated strategy can lead to better retirement outcomes for clients

Annuity vendors experienced robust performance in Q1, with traditional variable annuity sales rising by 13% year-over-year to $14.5 billion, benefiting from strong equity market performance. Overall annuities amassing $113.5 billion in sales, marking a 21% surge compared to Q1 2023. Although falling slightly short of the Q4 2023 pinnacle, preliminary findings from LIMRA's U.S. Individual Annuity Sales Survey reveal this quarter's sales accounted for 84% of the total U.S. annuity market, the highest first-quarter performance since the 1980s. 

Bryan Hodgens, head of LIMRA research, attributed this trend to favorable economic conditions and heightened investor interest in securing retirement income guarantees, foreseeing continued resilience in annuity sales despite potential regulatory and economic challenges ahead. Variable annuities are expected to tack on another 10% through the end of the year.

Fixed-rate deferred annuities reached $48 billion, a 16% increase from Q1 2023, driving over 42% of the total annuity market. Fixed indexed annuity sales hit a record high of $29.3 billion, up by 27% year-over-year. Income annuity sales soared to a quarterly high, with SPIA sales reaching $4 billion and DIA sales reaching $1.1 billion, up by 19% and 35% respectively.

Finsum: Bond rates could be coming down as the Fed starts to ease rates and other retirement vehicles will become more attractive.

There is a subtle distinction between fee-based and fee-only advisors. Fee-only advisors exclusively offer financial advice but don’t sell any products with commissions. Fee-based advisors also mainly offer financial advice, but they may also sell other non-investment products with commissions, like insurance. This means that they cannot market themselves as being ‘fee-only’. 

Many advisors are moving to these models due to their simplicity, while there has been an increase in regulations around the fiduciary standard. In fact, the industry as a whole is seeing fewer broker-dealer accounts and growth in investment-advisory accounts. As a result, many products can now be bought in investment-advisory accounts without a commission, such as annuities and alternative investments. 

An important consideration for an advisor going independent is responsibility for compliance. This requires registering with the state regulator or the SEC if there are more than $100 million in assets. It also means responding to regulatory inquiries, developing a compliance program, and having a system to ensure compliance. 

This additional burden highlights the challenge of running an independent shop. Another is that there is less time for clients, especially during the initial stages. Even afterwards, the additional responsibilities will lead to less time and energy for client service, prospecting, marketing, etc. By choosing a fee-only or fee-based model, advisors can have less of a regulatory burden.

Finsum: Many advisors are moving towards a fee-only or fee-based model. The biggest reason is that it simplifies and reduces the compliance demands for advisors.

Lincoln Financial Group unveils the 1 Year S&P 500 Dual Trigger account, a pioneering addition to fixed-indexed annuities, offering market adaptability and full downside protection. This innovative option addresses consumer concerns about inflation, investment losses, and market volatility, catering to the 61% of consumers seeking growth and protection in their investments. 

Senior vice president of Annuity Product Management, Daniel Herr, anticipates robust sales approaching $100 billion by 2025, with the introduction of the 1 Year S&P 500 10% Daily Risk Control Trigger expanding growth opportunities.

As millions of Americans transition into retirement annually, Lincoln Financial remains committed to safeguarding their financial futures through diverse investment strategies. Senior vice president of Retirement Solutions Distribution, Tim Seifert, emphasizes the importance of new crediting strategies in empowering retirement planning. 

Finsum: Index annuity offerings offer a great alternative to fixed income for those in or nearing retirement. 

1. Rowe Price made an aggressive bet in 2020 by increasing exposure to equities in its target return funds, as equities were crashing due to the pandemic. At the time, the asset manager was criticized for this move; however, it’s paid off in spades, with the S&P 500 hitting new, all-time highs earlier this month. As a result of its success, T. Rowe Price now has the third-most assets in terms of target-date funds behind Fidelity and Vanguard. 

Further, T. Rowe Price has remained up to 98% invested in its target-date funds, which is higher than its peers. According to an analysis from Cerulli, retirees hold up to 55% of their portfolio in equities at T. Rowe Price. Compare this to Fidelity and Vanguard, where equity allocations are 38% and 30%, respectively. 

Despite its recent success, some continue to believe that T. Rowe Price’s target-date funds are taking on too much equity risk. According to Ron Surz, the president of Target Date Solutions, “80% of assets should be risk-free at retirement. Virtually all target date funds are way riskier than the theory they follow." However, some believe that higher allocations to equities are necessary given that lifespans are increasing, which increases the risk that retirees could outlive their savings. 

Finsum: T. Rowe Price is pursuing a more aggressive strategy than its peers when it comes to equity allocations in its target-date funds. So far, it’s worked well, but there are some skeptics.