Americans are living longer which means retirement planning is more essential and challenging than ever before. However, there is a product that provides a reliable, steady stream of income in retirement, regardless of market conditions.
Annuities protect people from the risk of outliving savings and ensure lasting financial security — guarantees not available anywhere else in the marketplace.
30.4 million Americans will turn age 65 between 2024 and 2030.
Only 15% of all private industry employees had access to a defined benefit plan in 2024.
67% of Americans worry more about running out of money than death.
An annuity is a long-term agreement (contract) between a consumer and a life insurer. The company agrees to make a series of income payments to the consumer in exchange for a premium (or premiums) that they pay. Annuities allow people to accumulate funds on a tax-deferred basis for later payout in the form of a guaranteed income that they cannot outlive, similar to a pension.
Middle-income Americans rely on access to guaranteed lifetime income. The median household annual income among annuity owners is $76,000. For retirees with modest balances — $250,000 or less — annuitizing a greater portion of savings can have the biggest impact on retirement outcomes.
As with any major purchase or financial decision, it’s important to evaluate needs and options carefully. There are consumer protection standards and tools (at the federal and state level) available that provide simple and practical guidance about annuities.
For example, when buying variable annuities, companies are required to provide an SEC-approved prospectus in plain English with fee disclosures.
NAIC BUYER’S GUIDES
NAIC.org has a number of consumer publications allowing people to compare options along with other helpful guidance.
SIMPLE & STREAMLINED DISCLOSURES
Federal regulators have adopted improvements to allow disclosures to be concise and reader friendly to improve understanding of the contract’s features, fees and risks.
Several state and federal standards require consumers’ best interest be reflected in sales recommendations and strictly govern deceptive sales practices. In fact, salespersons have four obligations in putting your interests first and ensure transparency, honesty and clarity are present in interactions:
Salesperson must disclose, in writing, the material facts relating to the scope and terms of the relationship, and all material conflicts of interest associated with the recommendation.
Salesperson must establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Regulation Best Interest.
Material conflicts of interests must be identified, disclosed and mitigated.
Salesperson must exercise reasonable diligence, care, and skill.
Retirement savers are eyeing guaranteed lifetime income products and financial planning options.
