Annuities Key to Financial Future

As more and more Americans look for ways to save money as retirement approaches, annuities prove a great option to get one’s finances set for the post working years.

Annuities prove a key component to addressing the retirement income crisis many American workers are dealing with in 2010.

Bill Mullaney, president of the U.S. Business division of MetLife, recently told the Senate Special Committee on Aging, “Retirement begins a fundamental transition – from living off one’s wages to living off one’s savings. With this transition comes multiple risks for individuals to manage, the most difficult of which is longevity risk; the risk of outliving one’s savings.”

As Mullaney sees it, it is critical that those making policies, the insurance/financial services industries and employers, come together to help make sure that retirees and those retiring down the road have adequate income to last the rest of their lives.

Mullaney went on to point out that competitive realities are forcing companies to discontinue defined benefit pensions, which provide lifetime payments, in favor of defined contribution plans, which move the responsibility for managing assets on individuals. For the workers who don’t have a retirement savings plan as an option at work, the financial burden is even more acute.

For those looking to ease this burden, annuities prove a great answer.

With annuities, the burden is eased by moving the risk of outliving one’s savings to a life insurance company. Annuities offer retirees a variety of guaranteed income options that address an array of requirements and can offer protection against both longevity and investment risk.

Employers can assist their workers in obtaining retirement income security by offering enhanced education regarding guaranteed lifetime income and annuity options in defined contribution plans.

When it comes to this area, legislation like S.2832, the Lifetime Income Disclosure Act, would offer a lifetime income illustration on 401 (k) statements, thereby helping employees visualize how their savings would meet simple monthly living expenses following retirement.

Also, H.R. 2748, the Retirement Security Needs Lifetime Pay Act, would encourage workers to choose a portion of their retirement assets to acquire guaranteed income for life. It would also encourage employees who have diligently saved in an individual annuity to partially annuitize a part of their savings to have guaranteed lifetime income in retirement.

Using annuities to put together a good retirement savings package is a great option for many workers who may otherwise not have had an answer to the financial crisis.