Displaying items by tag: annuities

Annuities offer a dependable source of income in retirement, primarily provided by life insurance companies. With various annuity products available, the challenge is identifying the most reputable providers that align with your retirement needs. 

Bankrate guides this process by evaluating companies on customer satisfaction, financial strength, product diversity, and other key criteria. Their analysis includes top providers like Allianz Life, known for its wide selection of fixed index annuities, and Prudential, offering diverse annuity types with flexible options. 

Pacific Life, another strong contender, stands out for its financial stability and customer service, despite higher minimum premiums. Choosing the right annuity provider involves weighing factors like fees, accessibility, and product offerings to match individual retirement goals.

Finsum: Index annuities are an increasingly important vehicle for those nearing retirement as inflation has been such an important investment factor in recent years. 

Annuity sales surged in the second quarter, with traditional variable annuities reaching $16.5 billion, a 20% increase from the same period in 2023. Registered index-linked annuities (RILAs) led the growth, with a 45% rise in sales year-over-year. 

Overall, sales of all tracked annuity types climbed 31% to $110 billion. This uptick signifies a strong demand among retirement savers for insurers to manage some of their market risks. 

While variable annuities link returns to fund performance, RILAs often tie returns to investment indexes and are increasingly preferred by insurers due to easier administration and hedging. Recent SEC regulations may impact how RILAs are classified compared to traditional variable annuities.

Finsum: It’s important to monitor this ongoing classification of RILAs as this could have a significant impact on the industry. 

Rising interest in commodities like gold, oil, and grains, fueled by concerns over inflation and climate change, is impacting the design of fixed indexed annuities and registered index-linked annuities. This shift appeals to clients seeking hedges against inflation and additional asset diversification. 

While traditional indices like the S&P 500 dominate annuity allocation options, commodity indexes are emerging as viable alternatives, offering potential returns between 3% and 5.5% annually. Index exposure varies, with some annuities offering direct access to single commodities, like gold, while others provide diversified commodity index options. 

The inclusion of these indexes signals a broader trend toward more diversified and defensive investment strategies within annuity products, catering to clients' evolving needs in a changing economic landscape.

Finsum: These annuities could provide a natural way to get industry exposure and hedge against key issues like inflation.

When evaluating an annuity, the advisor typically presents an illustration that outlines future values and any applicable surrender charges.

For a multi-year guaranteed annuity (MYGA), focusing solely on guaranteed values without much variability, except for potential market-value-adjustment penalties during the surrender period. On the other hand, a fixed indexed annuity features a more complex illustration, including guaranteed cash values and hypothetical future values based on favorable market performance. These annuities earn interest tied to changes in a market index like the S&P 500, offering the security of principal protection even if the index declines. However, the growth is limited, as you will only receive a portion of the index gains.

Understanding the specifics of these illustrations is vital, particularly distinguishing between the different types of value presented to clients.  

Finsum: Annuities can be complex but understanding your client’s interest can put them in the perfect vehicle. 

As more Americans retire without pensions, individual annuities are becoming crucial for financial security. Registered index-linked annuities (RILAs) have gained popularity, especially during the pandemic due to their downside protection and upside potential. 

In 2023, RILA sales reached $47 billion, a 15% increase from 2022, marking nine consecutive years of growth. This trend is expected to continue, with forecasts predicting sales of $52 billion in 2024 and $57 billion in 2025. 

RILAs, primarily sold through independent broker-dealers, are now outpacing traditional variable annuities in sales. The market, driven by innovation and new entrants, is poised for sustained growth.

Finsum: Independent broker dealers leading the pack is interesting and something to monitor during the annuity boom.