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Annuities are not getting any easier
When I started in the annuity business 20+ years ago,
annuities were simple.
Nearly all fixed annuities had minimum guaranteed interest rates
of no less than 3.00%; some indexed annuities’ guarantees were as
high. It wasn’t hard to find annuities with double-digit yields if the
product had a generous bonus. Nearly every product offered at
least 10% penalty-free withdrawals annually, and the full account
value was paid to the beneficiaries upon death. Sure, indexed
annuities were a little more complicated: seven different ways
of calculating indexed interest on four different available indices.
However, variable annuities (VAs) were a dime a dozen; fixed
annuities were plentiful; indexed products were few. Annuities have changed dramatically!
Those annuities are a far cry from what we have available in
producers’ toolboxes today. More than a decade of depressed
10-year Treasury rates have made pricing fixed/indexed annuities
a challenge in creativity. Where guarantees used to be taken for
granted, FIXED annuities are now adopting 0.00% annual floors
minimum guaranteed surrender values, which function like the
guarantees on indexed annuities. Today’s credited rates on fixed
annuities are averaging far less than the minimum guarantees
offered not-so-long-ago- a mere 2.83%!
How on earth does one determine
which annuities are in their client’s
“best interests?!?” These historical-low rates have also resulted in “innovation” in
the indexed annuity by way of offering a dozen different ways of
calculating indexed interest on 108 different indices. That is a big
deal now that indexed annuity sales are nearly even keel with VA
sales, and there are now double the number of indexed annuity
products that there are VAs. Did I mention this entirely new class
of products called “structured annuities?”
The search for yield has restricted liquidity so 10% penalty-free
withdrawals are a luxury and death benefits often pay less than
the full account value upon the annuitant’s passing. There are a
couple thousand annuities available for sale today and over 1,000
different riders available. How on earth does one determine which
annuities are in their client’s “best interests?!?”
091919 Wink NAILBA Ad copy.pdf 1 9/19/2019 3:22:47 PM
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