Presented by Deb Strong
Baby boomers are learning about the importance of securing guaranteed lifetime income, and with the help of their agents they are reaping the benefits of a secure retirement. As more and more boomers approach retirement age and obtain annuities to cover their basic expenses, this demand, coupled with increasing life expectancies can have a dramatic effect on payout rates for future purchasers.
Coming up in January of 2016, insurance carriers will be using 2014 Mortality tables, versus the 2000 Mortality tables. We will be seeing a 2.4 percent increase in life expectancy with a 65 year–old male. And we will see a 2.8 percent increase in life expectancy with a 65 year–old female. You may be asking yourself right now how this is going to affect insurance companies and ultimately, the consumer. Because these updated mortality tables will be adjusted to properly reflect longer life spans, insurance companies may have no choice but to lower their payout rates.
The bottom line is, even though people may be asking themselves why they should buy an annuity in today’s low interest rate environment, I would challenge them by saying that today’s rates are not low, but instead the “new” rates. Today’s rates could be the highest you see for a very long time. They are a longevity credit play.
We will more than likely, see payout rates drop in 2016; some insurance carriers may lower the rollup rates, others may adjust the factors used when turning on income or when annuitizing. But, mark my words, we will see changes next year. How are you equipped to handle this when your clients start asking you questions about their future income? And certainly, you don’t want them to be caught off guard when they find out next year that they could have had a greater opportunity if their advisor would have told them in 2015. There is no time like the present to help your clients lock in a good payout rate today! Consider this concept: if you’ve had clients that are reluctant to get started, then have them start a contract, such as those offered through American Equity, with a deposit of $5,000 (or similar) today. That locks them into current payout rates and allows them to make future deposits under the same rates!
We can help find the right carrier and product to match their needs!