The Right Time for Annuities

Did you know that the majority of retirees are not overly confident they have saved enough for a comfortable retirement? In addition, nearly four in 10 retirees have not estimated how many years their assets and investments might last in retirement, according to LIMRA’s study “Will Retirement Assets Last a Lifetime.”

Enter annuities. Now before you stop reading because the word turns you off, know that you are not alone. According to the study “Reclaiming the Future” by Allianz Life, 54% of those surveyed did not like the word “annuity.” But when asked to choose between high returns and guarantees, 69% of those surveyed said they would prefer a product that was “guaranteed not to lose value,” which describes an annuity. In retirement planning, lifetime income annuities provide safety, security and a guarantee that you (the annuitant) will not outlive their income.

Annuities have a long history of helping people. I bet you didn’t know that they’ve been around since the Roman Empire? Here are a few highlights of the history of annuities as compiled by Tom Hegna in his book Pay Checks and Play Checks.

  • 225 – A Roman judge produced the first known mortality table for “annua,” which were lifetime stipends made once per year in exchange for a lump-sum payment.
  • 1776 – The National Pension Program for Soldiers was passed in America prior to signing the Declaration of Independence. It provided an annuity payment to soldiers and their families.
  • 1812 – The Pennsylvania Company for the Granting of Annuities was founded.
  • 1935 – President Franklin D. Roosevelt signed the Social Security Act. Social Security is essentially a lifetime income annuity.
  • 1940 – Ida May Fuller became the first Social Security recipient. She received 35 years of payments for a total of $22,000.
  • 1952 – TIAA-CREF offered the first variable deferred annuity, which enabled educators to invest part of their retirement in equities as a hedge against inflation.
  • 1986 – Congress passed tax reform that made deferred annuities one of the few financial products where you can invest unlimited amounts and get the benefit of tax deferral.
  • 2011 – Individual annuity sales reach $240 billion

Are you part of the nearly half of Americans ages 45 to 70 who have no financial plan in place to protect against outliving their assets and the rising cost of health care should they live longer than they expected? Safety, security and an income you cannot outlive: An annuity is the ideal investment for longevity and retirement planning.

by Marvin H. Feldman

Marvin H. Feldman, CLU, ChFC, RFC, is president of the Feldman Financial Group in Palm Harbor, Fla., and president and CEO of Life Happens. He is a 41-year Million Dollar Round Table member and was the 2002 president. He is a 33-year member of the MDRT Top of the Table and a past Top of the Table chairman. He also is the recipient of the 2011 John Newton Russell award, the highest honor bestowed on an individual by the insurance industry.

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