Insurers creating innovative annuities

Apr 24, 2006 @ 12:01 am

By Lisa Shidler

CHICAGO - Insurance companies are developing annuity products that squeeze as much income as possible from retirement accounts.

The biggest concern once retirees have accumulated wealth is making the assets last for as long as four decades, said Norm Mindel, financial adviser with Genworth Financial Advisers Corp. of Schaumburg, Ill.

"The concern most advisers are starting to come up with is, 'What happens when my client outlives the money?''' he said. "Now you get into the new generation of advisement products." Genworth has more than $2 billion in assets under management.

Several companies, such as RiverSource Investments LLC, a subsidiary of Ameriprise Financial Inc. of Minneapolis, and The Hartford (Conn.) Financial Services Group Inc., are producing products that will allow retirees to generate income for the life of their retirement.

Officials say these products are meant to complement a person's diverse portfolio and provide monthly income for retirees.

RiverSource is launching a program in May called Guaranteed Withdraw Benefit for Life, said Kim Mickelson, vice president of marketing for annuity products.

'A guarantee'

In this annuity, the retiree has the option of withdrawing 7% of the total account each year for 14 years or using 5% of the account each year for life. A key feature of this product is that individuals can lock in additional gains each year, Ms. Mickelson said.

"We're very excited about Guaranteed Withdraw Benefit for Life," she said. "It's the next generation of retirement products. It's a guarantee benefit for a client. I'm sure we'll come up with something new for next year."

But Mr. Mindel said some funds, such as annuities, are hard sells to clients who have become accustomed to investing in products that generally provide larger returns.

"Now you're telling your client to turn the money over to an insurance company," he said. "There are some psychological barriers."

Mr. Mindel thinks that it is important for clients who want consistent income for the life of their retirement to consider an annuity as part of their retirement package.

"Annuities used to be looked at as a bad investment," he said. "They're really not an investment; they're sort of an insurance against living too long. If you wind up living too long, there's always going to be some money coming in."

Baby boomer clients find a monthly income attractive. To explain the benefits of annuities to clients, advisers compare them with pension funds, noted John Diehl, certified financial planner and vice president at The Hartford. It launched the Hartford Income Security annuity recently.

"For pure income, this type of longevity insurance is the best way to buy pure income," Mr. Diehl said. "It's almost like setting up my own pension plan. That's the newest of products."

There is a strong need to help retirees generate income for many years, said Michael Beriss, a senior financial adviser at the Bethesda, Md., Ameriprise office. "I think when you combine the need with the fear and the huge number of dollars, the investment world won't sit by and let it go," he said. "They see a huge opportunity to make a lot of money and help a lot of people. The opportunities for people to get creative solutions will only grow."


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