MetLife, Other Insurers Face Tough Annuity Calls

With the Department of Labor annuity ruling, the industry and retirees will have to wait and see what happens next. The 1,100 page ruling leaves insurance agencies like MetLife and others determining if they will fade away from annuity offerings or adapt to the new exemption-free offerings. If they opt to adapt, which most experts appear to believe will be their course of action, variable annuities could prove much harder if they switch to a fee-based system.

As ThinkAdvisor notes,

“As a result, many anticipate that, rather than attempting to comply with the strict standards imposed by the pending DOL rule, firms will switch from a widely applicable commission-based model to a fee-based model that charges an asset-based fee. While in some cases this could reduce the overall cost of the product, generally charging an annual fee rather than an upfront commission could still result in a product that costs the same amount over time.

However, it is also possible that many of the currently available riders to annuity products will be eliminated in order to produce a product that charges a lower overall fee, as advisors evaluate whether the lower cost, rider-free product can ultimately serve the same client needs over time.”

Many expect some form of the best interests contract exemption will be included in the final rule. So, the market is likely to adapt in the coming months. However, what sort of adaptation remains uncertain–a status that many expect to remain the same until at least the fall. Eric T. Steigerwalt, chairman, president and CEO of MetLife Insurance of Conn. said during a Q1 earnings call that, “Maybe four months or five months from now, we’ll have a better view of that, but right now given the fact that this (DOL rule) is almost 1,100 pages, we’re just going to have to wait and see what a number of distributors are going to do.”

So, the current situation appears to be a wait-and-see scenario. What happens this fall should dictate what level of adaptation the market makes. It would be unlikely to see annuities be phased out, but many options are still in play.

Have You Considered Income Maximization Through a SPIA?

Income Maximization

Sometimes a retiree’s nest egg turns out being less than what they planned on being.

Be it unexpected costs, projection errors or even a longer life expectancy, countless factors can upend your hard-earned retirement. Other factors out of your hands like declining CD and bond rates might derail your otherwise perfect retirement approach. And you can’t forget stock market volatility. With countless variables out there, it’s best to pad your income even if you have the slightest concerns about your future.

Are you dependent on earned interest income from fixed income investments? What about the stock market? If you do, you are at risk of losing your savings. Even if you’re eating through your retirement at the recommended 4% per year, outside elements have the potential to deplete your future faster than accounted for.

The bottom line is, don’t wait until the well is dry to search for more water. If you even think your financial levels are declining at a faster rate than expected, it may be time to revise your plan.

Now might be the time to consider maximizing with a single premium immediate annuity.

Income Maximization

Income maximization is just what it sounds like. It’s strategic planning to extend and optimize your earnings over your remaining years. In doing so, you reduce any potential impact that the aforementioned factors can have on your nest egg.

If you are over 60 years of age and are concerned about having enough income to sustain your retirement or plan on leaving an inheritance to your heirs, income maximization is an option worth considering.  

Thinking about retiring with the optimal funds is always a wise, proactive idea. Remember to always take a thoughtful approach to your retirement. With well-planned action steps in place and successful implementation, you should be positioned to enjoy your retirement in the way you envisioned.

The Advantages

Sure, maximized income sounds like a plan we all can get behind. More money? Sign me up! But there are more specific advantages to embarking on this endeavor. The first benefit is certainly a larger, more secure nest egg for you and your loved ones.

But additional benefits abounds when you factor in the additional level of security and comfort knowing that you’ve eliminated the risk from markets and other fluctuating investments. This new approach places you in a position to have a secured, guaranteed income from your annuity while maximizing net after-tax income.

In addition to reducing retirement risk, single premium immediate annuities usually provides you with more income. Other potential gains from your new strategy include increasing the rate of return on your investment and granting you tax advantages you previously didn’t qualify for. If you made this decision for your heirs, you have even more benefits potentially on the horizon. Your legacy is now secured and extended to heirs while maintaining the previous value of assets for their eventual inheritance.

As I mention whenever giving advice, do you own research as well. Consult with your tax and retirement professionals to ensure that this is the right course of action. Retirement is not a one-size-fits-all endeavor. Make the right, smart decisions for you and your loved ones.

To learn more about maximizing your income through single premium immediate annuities, and other ways to reach your pot of retirement gold, pick up a copy of my book Outlasting the Storm: A Survival Guide to Retirement Income Planning.

Rainbow Connection (Getting the Largest Pot of Gold)

Rainbow-Connection-compressor The rainbow crediting method launched towards the end of 2007. Unfortunately, the launch coincided with the tail of the previous bull market and annuity buyers selecting the rainbow method in 2007 and much of 2008 received the same zero returns as other indexed methods. However, as the stock market rebounded in 2009 the rainbow began to show its performance colors and this article looks at the relative performance of the different rainbow methods first reviewed two years ago.

The rainbow method is an option basket whose best-performing indices are weighted more heavily than those that perform less well. It is always a “look- back” because the money is allocated based on the ranking of the performance after the period is over. Rainbows are always index blends, but not all index blends are rainbows. The difference is blended methods state at the beginning what the percentage make-up is of the indices in the blend, but the rainbow method combination is based on the returns calculated with the largest portion going to the best performers. The Rainbow marketing appeal has been expressed by saying that the annuity buyer gets to bet on the race after it has been run and that most of the bet will be put down on the horses that “win or place.”

Learn about the rainbow strategy and how you can get your own pot of gold in my book, Outlasting the Storm: A Survival Guide to Retirement Income Planning


Additional credit to Jack Marion “Rainbow Connection (Getting the largest pot of gold).” May 2010.