Annuities can offer unique features and benefits but also carry many risks
An annuity is a financial product that provides a guaranteed income stream for a set period of time, typically for the life of the annuitant. Annuities have traditionally been sold to individuals as a way to provide a source of income in retirement, but in recent years, there has been a growing demand for annuities within employer-sponsored retirement plans.
According to a new report from the Life Insurance and Market Research Association (LIMRA), demand for annuities within employer-sponsored retirement plans is expected to "grow exponentially" in the next two years. This is due to a number of factors, including:
· The current economic environment;
· The retirement income needs of baby boomers; and
· The desire for guaranteed income streams.
The Need for Retirement Income is Real
The LIMRA report predicts that this demand will continue to grow in the coming years, as more and more baby boomers reach retirement age and begin looking for ways to supplement their retirement income.
The report also notes that the current economic environment, which has been characterized by low interest rates and high market volatility, has made it difficult for many retirees to generate sufficient income from their retirement savings.
As a result, more employers are looking to offer annuities within their retirement plans as a way to help employees secure a reliable source of retirement income. According to the report, 30% of employers currently offer annuities within their retirement plans, and this number is expected to grow significantly in the coming years.
Different Types of Annuities
There are several different types of annuities that can be offered within employer-sponsored retirement plans, including fixed annuities, variable annuities, and indexed annuities. Each type of annuity has its own unique set of features and benefits, and employers will need to carefully consider which type of annuity is best suited for their employees.
One potential benefit of offering annuities within retirement plans is that they can help to reduce the risk of running out of money in retirement. Because annuities provide a guaranteed income stream, they can help to ensure that retirees have a stable source of income throughout their retirement years, even if they live longer than expected.
Potential Drawbacks Too
However, there are also some potential drawbacks to offering annuities within retirement plans. For example, annuities can be complex products, and employees may not fully understand how they work or what their benefits are.
Additionally, annuities can be expensive, and some may have high fees and commissions.
Do Your Homework
As employers and employees alike seek ways to secure a reliable source of retirement income, annuities may become an increasingly popular option.
Your financial professional can help you determine whether annuities make sense for you.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
Equity Indexed Annuities (EIAs) are not suitable for all investors. EIAs permit investors to participate in only a stated percentage of an increase in an index (participation rate) and may impose a maximum annual account value percentage increase. EIAs typically do not allow for participation in dividends accumulated on the securities represented by the index. Annuities are long-term, tax-deferred investment vehicles designed for retirement purposes. Withdrawals prior to 59 ½ may result in an IRS penalty, and surrender charges may apply. Guarantees are based on the claims paying ability of the issuing insurance company.
This article was prepared by FMeX.
LPL Tracking #1-05362272