The topic of annuities has become extremely prevalent in the retirement income market “primarily because of the importance of a guaranteed* income stream to at least help meet basic expenses, which can be realized with a single premium immediate annuity,” says Chuck Green, author of the Life Health Pro article “Better Addressing the Boomers through Annuities and Life Insurance.”
If there is one thing economists agree on these days, it is that immediate fixed annuities are becoming much more favored among Baby Boomers. According to Steven Weisbart, PhD, senior vice president and chief economist of the Insurance Information Institute, one “rare point of virtually universal agreement” among economists is that “immediate fixed life annuities” are the grander, more preferred financial vehicle for developing a foundation for paying out retirement income that does not decrease and is guaranteed* to last the lifetime of the beneficiary. Moreover, Weisbart added that, if indicated, a spouse or partner is guaranteed* that income as well. Weisbart then went on to say that, while there is only a small population of Baby Boomers currently using fixed index annuities, that number seems to be changing. 1
To give you a little glimpse of what you will be looking at in the future, there are roughly 77 million Baby Boomers according to the U.S. Census Bureau. In 2050, the expected number of people 65 and older is 88.5 million, which will make up 20 percent of the total population at that time.
Weisbart stated that Boomers are still building up their portfolio, which is one reason they aren’t yet using an immediate annuity.
The use of single premium immediate annuities will become much more popular among Baby Boomers within the next ten years as they near retirement, predicts Hugh Smart, assistant vice president and director of Advanced Markets at Columbus Life Insurance. Smart further noted that, with people living longer and underwriting standards lightening up a bit, life insurance has grown more prevalent among the Boomer population.2
As a result, those who, a few years back, were not able to obtain life insurance because of an extreme illness may now have the option to do so if a number of years have gone by since the time they had initially pursued getting the insurance.
As I’ve stated in previous e-mails, people really need to start taking longevity into consideration, and it seems as though Boomers may not be properly planning for that, just as their parents and grandparents didn’t. However, things are different now and times have most definitely changed. As Smart said, at least one spouse in a marriage, where they are each aged 65, is now projected to live to be 90, maybe even longer.
People need to start acknowledging this and acting around it; yes, Boomers do recognize the struggle in meeting their needs due to lack of insurance, “but getting them to do something about it is another thing,” says Smart. Many people don’t realize that there are “a lot of new benefits and new products out there.”
But, you see, if there is one thing we pride ourselves on here at JD Mellberg Financial, it is educationand understanding. Education is of utmost importance to me with my firm, my trained agents, and, most importantly, my clients. And, it is for that reason that we help you get up-to-date and aware of these “new benefits and new products.”
Jesse Slome, executive director of the American Association for Long Term Care Insurance, says it is safe to assume that the “funding retirement” sector of finance is the most dominant and important financial priority for everyone in this group (Baby Boomers), and if it isn’t, it should be.2
Slome considers that the last decade “has demonstrated, it’s likely that, in retirement, there will be several times when (Boomers) could face significant, unexpected, and potentially devastating financial setbacks because, in part, people are living longer, precipitating the potential for ‘black swans’ or unexpected events with dire consequences.”2
As I noted earlier and as Slome acknowledges as well, many people will live into their 80s and 90s, maybe even longer (and many people already are living that long), and as long as current trends continue, so will the rise in longer lifespans; Slome expresses his opinion by saying, consequently, it is not “too alarmist to say that the potential to have one’s retirement finances upset is high at a time when the retirees will be in no position to deal with it.”
An study conducted by the Center for Retirement Research at Boston College reveals a potentially difficult plight as Americans encounter difficulty in meeting healthcare expenses. The Center for Retirement Research performed over 300,000 simulations, determining the standard cost of $197,000 for lifetime health care for an ordinary married couple at the age of 65.
You think that sounds bad? This number takes care of insurance premiums, out-of-pocket costs, and home health costs, yes, but what happens when you throw nursing home costs into the mix? Well, that $197,000 turns into $260,000. You think that sounds bad? That figure comes with a 5 percent risk of exceeding $570,000.
Clark Troy, research director for the Aite Group, stated, “after a period of consuming a lot and not effectively planning for the future, Boomers are waking up to the fact that they have needs both for retirement and for the protection of their family’s financial lives. It’s eye-opening.”2
This is why I make sure my agents and I receive continual training on newer products and approaches so we never fall behind, and, therefore, never let you fall behind.
Again, I can’t stress to you enough how much importance I place on education to my agents and for my clients. I provide training to my agents on a regular basis so they are always well-equipped with the knowledge they need to bring about the most success with our clients.
In a study done by Pew Research Center, they found that Baby Boomers comprise 33 percent of the total internet-using population. And what do most of these Boomers do on the Internet? They spend time researching information on life insurance choices. However, as Smart says, comparison shopping on the internet for such products is extremely challenging, because “you (basically) can do comparison shopping on term products, but because life insurance and long-term care insurance are fully underwritten products, you really can’t comparison shop. You don’t know what kind of rating you’re going to get from any insurance company.”
Well, we are here to provide you with these answers and this education and help you figure out the stuff you can’t. Fill out a survey here or call 1-877-907-9113 today for a free quote. You will be able to set up a free strategy session right now. Contact us to get the answers you can’t and won’t find on the internet.
*Annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer.
**Depending on contractual stipulations, the amount of principal withdrawn may affect the amount of the monthly income stream from the annuity.