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Annuities remain pivotal parts of advisors' tool boxes and that's increasingly true in today's low-yield environment. With government and municipal bonds not doing the trick when it comes to yield, advisors have ample latitude with which to engage clients on the idea of lifetime income.
However, the work doesn't end there for advisors. As experienced professionals know, hundreds of companies are out there pitching annuities, presenting money managers with a dizzying array of potential partners from which to choose. Offering a wide range of annuities and accompanying resources and tools, AIG is the annuities partner advisors are seeking.
AIG provides advisors with the education and programs to better connect with clients and that extends to products beyond annuities, including life insurance and other retirement solutions. That's crucial for advisors – and clients – because “Peak 65” is nearly here.
“Occurring in 2024, Peak 65 is a term used to describe the point in time when more Americans will turn age 65 than at any point in history,” according to AIG. “The Alliance for Lifetime Income recently published a new economic report that speaks to the state of America's existing retirement systems and offers important insights. Now more than ever, it's important for Americans to examine their retirement income strategy and consider the role annuities can play in providing additional protected lifetime income beyond Social Security -- for a more secure future.”
Annuities as Bond Alternatives
With 10-year Treasury yields hovering around 1.30% and the 30-day SEC yield on the S&P National AMT-Free Municipal Bond Index residing at an anemic 0.75%, clients are discovering fixed income isn't offering much income these days.
Indeed, those statistics are dour because municipal bonds and Treasuries are old standbys of the retirement income equation. AIG provides advisors with the annuities solutions necessary to present to clients complements or alternatives to low-yielding bonds. Take the case of traditional single premium immediate annuities (SPIA) as possible bond replacement ideas.
An individual investor can consider “1) a 30-year bond, and 2) an SPIA. If she chooses the bond, she will buy it directly, spend the income, and recoup the principal when the bond matures. With the annuity, she will hand over her money to the insurer, obtaining a stream of ongoing payments in exchange. In either case, her credit risk is negligible, as both the bond and the annuity’s insurer are rated AAA,” according to Morningstar.
As Morningstar notes, simple math is in favor of annuities in the above scenario and that's true for single female and male clients as well as married couples.
“Top-rated corporate bonds currently yield 2.79%, thereby providing an annual income of $2,790. Annuity rates are considerably higher,” says the research firm. “As a single female, our retiree can earn 5.09%, or $5,090 per year. That amount rises to $5,270 for males and drops to $4,750 for married couples. In all cases, the annuity yields far more income than the bond.”
That's fodder for clients skittish about annuities. Moreover, AIG has the goods when it comes to streamlined annuities offering guaranteed lifetime income, protection against bear markets and a variety of income guarantees, among other favorable traits.
Annuities Applicable to Broad Audience
While annuities are often viewed through the lenses of fixed rate and variable and as instruments most suitable for older clients, AIG's index annuities are potentially interesting to a younger clientele, perhaps those that have been working awhile and have endured a bear market or two.
Index annuities help clients “benefit from a powerful combination of growth potential, principal protection and guaranteed lifetime income. By blending market upside with downside protection, index annuities can help provide the income you need to stay on the retirement fairway,” according to AIG.
Bottom line: Talking annuities with clients is as relevant today as it's ever been. AIG helps advisors up their annuities games and improve client outcomes.
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