Displaying items by tag: annuities

Given their widespread popularity lawmakers have scrambled to put together a series of changes to a popular retirement product in the last year and it looks like more are coming. There appears to be bi-partisan support for the additions building on the 2019 Secure act which tried to increase retirement security. The House and Senate bills both include changes that would remove the maximum amount on the Qualified Longevity Annuity Contract. Previously it was capped at the minimum of $135,000 or 25% of your retirement accounts. The Senate provision also bumps the minimum up to $200,000. The new provisions also include auto enrollment in 401(k) plans and a student loan exchange in existing 401(k) plans. The final piece to the provisions is an increase in catch-up contributions for existing 401(k) plans that could further bolster retirement savings.

FINSUM: One of the underappreciated aspects of the Biden administration is the expansion of savings vehicles for retirees across many income earners.

There is a growing interest among investors, particularly when it comes to retirement, in annuities. Nearly 4/5ths of investors have interest in annuities but as few as 10% of retirement plans offer them. Things are changing at fidelity however, as they are giving the opinions for a guaranteed income direct plan if your employers pick it up. And it seems more employers will be taking on annuities in part of their 401k coverage given the 2020 Secure Act which eased the legal burdens on companies when picking up annuity coverage. Additionally Fidelity is giving the option of naming a beneficiary to your annuity which will curb the biggest concern among investors.

FINSUM: Most Americans aren’t saving enough for retirement and for those retiring sooner rather than later an annuity is a more secure bet given market turmoil.

A new study by Alliance for Lifetime Income and CANNEX is shaking the foundation of the standard portfolio construction which uses 60/40 equity bond split to simultaneously grow and protect/provide income. Investors in hypothetical allocation, 20% of their portfolio into equities 14% into real estate and annuities made up the next largest category of 13% followed by CDs, bonds, and alternatives. This overwhelming support for annuities is interesting but even more intriguing iis that nearly 85% of investors were interested in a lifetime guaranteed income annuity or already own one. Advisors should hear their clients desires for annuities rather than push the traditional portfolio allocation. The increased interest in annuities is a growing trend for investors and will be a more prominent feature in the average portfolio.

FINSUM: The pandemic and the current financial landscape has upended what many investors thought of as a safe asset, and guaranteed income (even at a cost) is worth it for many.

Sweeping changes to the financial regulatory landscape are coming quickly. Stemming from changes to the interpretation of a Trump-age exemption are widening the regulatory umbrella. The U.S. The Labor Department is pushing a variety of accounts including annuities to be included in this expansion. Hidden and/or lofty fees in these areas are the source of the concern and lawmakers want the ‘best interests’ of investors in mind. Many companies are sprinting to align themselves with the regulation. Complying will include recordkeeping requirements, new policies and procedures, and new disclosures.

FINSUM: The drastic changes to regulation will really start to come in at the start of the year, and could monumentally alter the annuities market.

Annuities are more available than ever these days. Many large providers have been designing products just for RIAs and are making a big push in the area. Additionally, annuities are now easily included in 401ks. But when is it right to choose one? The overall value of annuities has declined as rates have fallen, but as rates rise, they are becoming more attractive as a source of good guaranteed income. Additionally, they offer unique tax benefits that help enhance returns. Brighthouse, for example is a leading provider of annuities and lead the industry with the FlexChoice (variable annuity) and Shield (index-linked annuities) products. Choosing the right annuity depends on your client’s goals.

FINSUM: Annuities increasingly fit into a client’s portfolio in myriad ways. In some cases for a lower wealth client, it can be a near one-stop shop to accomplish retirement goals, especially if that client is prone to not managing budgets well. In other cases, annuities can provide just a small portion of a portfolio, but do so with guaranteed income.