9/13/2023 0 Comments New york life annuity ratesSales of these investment-only variable products had “been a pretty flat line between $7 billion and $8 billion for the past few years, but in the first quarter this year, sales hit $9 billion, the highest level since 2015,” says Todd Giesing, Limra’s assistant vice president of annuity research. That’s led to a resurgence of interest in variable annuities used purely for tax-deferred asset accumulation, without guarantees on income. Variable Annuities:Ĭapital-gains taxes are expected to rise under President Joe Biden’s administration, especially for investors in the top income bracket. But advisors who use annuities generally recommend doing so for just a portion of assets, and argue that insurance always comes at a cost, and that, if this kind of investment helps give a client peace of mind, it’s worth considering. The illiquidity, along with costs and complexity, is fodder for critics. So consider annuities as long-term commitments, and be price-conscious when shopping for them. What’s more, because of their tax-deferred status, assets in annuities are treated like those in an IRA-withdrawals before the year in which you turn 59 ½ are subject to a 10% penalty. Many are sold on commission and come with seven-year surrender charges, which means you’ll owe additional fees if you make a withdrawal during that period. Here's what to know before you start looking for one.Īnnuities have a reputation of being problematically pricey, and it’s not entirely unwarranted. Then you can begin to sort through which specific contract best addresses your needs.Īnnuities can help plan for retirement during a volatile market. The best way to make sense of them is to assess what problem or concern you’re trying to address, and then decide which category of annuity can best do the job, says Tamiko Toland, director of retirement markets at Cannex, an independent research firm specializing in retirement products. Each type is designed for a specific task. "Single life" pays for one person's lifetime "joint life" pays for both spouses' lifetimes.Īnnuities are the Swiss army knives of financial tools. One of the tables also includes a new section, Variable Annuity Variations, to reflect an explosion in both product development and consumer interest.Ĭash refund: When an investor dies, any remaining principal is paid to heirs in a lump sum. We included fees and, where applicable, limitations on stock allocations because these factors affect underlying account values. This year’s tables introduce more key information on variable annuity contracts with guaranteed income riders. ![]() A contract’s competitiveness-or lack thereof-can change just with the tweak of a single factor, such as age, size of investment, length of surrender charge, or how remaining principal is paid to heirs at death. Contract terms-guarantees, benefits, rates, fees-change frequently, particularly in times of volatility or fluctuating interest rates. To help give a sense of the marketplace, Barron’s looked at 100 competitive contracts across different annuity categories, based on a set of assumptions about an investor’s profile. So, while one contract might be a good fit for one person, it could be a costly mistake with long-term consequences for another. Insurers have been churning out new types, each designed to address a particular aspect of investors’ unease. ![]() Overall, investors put $61 billion into annuities in the period, producing the strongest quarterly sales since the second quarter of 2019.Īs interest in annuities revs up after a tough 2020, product selection can be overwhelming. In this year’s first quarter, sales of a type of contract called a registered index-linked annuity were up 89%, according to Limra’s Secure Retirement Institute, an insurance research firm in Windsor, Conn. They also can offer considerably more income than would be generated by Treasuries or certificates of deposit, and their returns can be linked to stock-market indexes.Įager to lock in these protections, investors are driving some of the biggest annuity sales increases on record. Their insurance component can protect against investment losses or guarantee lifetime income, like a traditional pension, and investments within them grow tax-deferred, like assets in an individual retirement account or 401(k). It’s no wonder that investors in or nearing retirement are seeking alternatives to the traditional stock-and-bond portfolio.Īnnuities, a form of insurance with underlying investments, have the unique capacity to address these issues-when used wisely. Consider the myriad looming threats, each of which alone could be the bane of any retirement plan: potential tax increases, inflation, an overstretched stock market, and bond yields so low they’re useless for income and no longer serve as ballast during a stock market tumble.
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