Annuity News

Rethinking Conventional Wisdom About Money

Much has changed in light of the financial crisis. Among the changes is an increased level of skepticism when it comes to conventional wisdom in matters related to money. For example, a recent article suggests revisiting the following pillars of conventional wisdom--each of which had been pretty much sacrosanct prior to the financial crisis: Rent a home rather than owning it. Buy an annuity rather than investing in the capital markets. Leave money for heirs now rather than keeping it all until...

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Annuity

Investing

Capital

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Financial Crisis

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Consider Annuity Ladders to Meet Retirement Objectives

An annuity ladder basically involves spreading annuity purchases over time. For example, instead of taking $100,000 to purchase an immediate annuity today, a person might purchase five different $20,000 annuities over a seven year period. This approach has a number of advantages: The approach helps avoid the risk of purchasing an annuity at a less then optimal time--for example when interest rates are very low. In this sense, it is somewhat similar to dollar cost averaging when investing . The...

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Sequence of Returns Risk

Credit Risk

Interest Rates

Annuity Ladder

Dollar Cost Averaging

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Sequence of Returns Risk

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Interest Rates

Annuity Ladder

Dollar Cost Averaging

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Target Date Funds Under Increasing Scrutiny

Target date funds are receiving attention from the SEC, the DOL and Congress. The increased scrutiny is a result of the way that target date funds have performed during the market meltdown over the past year. As reported recently , in theory target date funds are supposed to provide a smooth and somewhat automated transition from more risky assets to less risky assets as people approach retirement. One of the problems is that the actual asset allocations for people approaching retirement varies...

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Asset

Investing

Market Risk

Sequence of Returns Risk

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Asset

Investing

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Sequence of Returns Risk

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MetLife Providing Banking and Mortgage Services

MetLife is making acquisitions so that the company is able to provide products and services that range beyond life insurance and annuities. In 2008, MetLife acquired two companies that provide mortgage-related services. One of these companies--Everbank Reverse Mortgage --is involved in the reverse mortgage business. MetLife, which technically is a bank holding company, seeks to create multiple product relationships with customers that either complement or augment their core life and annuity...

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Over Half of Adults Age 50-64 Plan to Delay Retirement

A recent Pew Research survey indicates that over half of working adults age 50-64 plan to postpone their retirement in light of the impact that the financial crisis has had on their retirement savings. The survey indicated that recent investment losses--not levels of income --are the primary factor that leads to angst among those who are set to retire in the near-term: But regardless of income or age, those who have lost 40% or more of their investment nest eggs are roughly twice as likely as...

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Income

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Financial Crisis

Retirement

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Income

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Financial Crisis

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Prudential EVP Comments on "Deeply Flawed" Retirement System

Bernard Winograd is an executive vice president at the Prudential Insurance Company . Speaking at a recent industry conference, Winograd expressed his views on the existing methods of explaining retirement issues and solutions in the United States: "The retail system in this country of explaining this (retirement) to people is deeply flawed. There are way too many people in the system without adequate training, and there are way too many people with the wrong motives." The "retail" system...

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Guaranteed Minimum Withdrawal Benefit

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Annuity

Guaranteed Minimum Withdrawal Benefit

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Use of Gift Annuities at Colleges and Universities on the Increase

Colleges and universities have become more comfortable over the past several years with using gift annuities as a funding source. A gift annuity allows the college to secure a lump sum donation from a donor. In exchange, the donor receives lifetime income payments from the college. The ability to donate a lump sum while maintaining a source of income from those funds can be very attractive to the donor. This charitable donation funding approach has been growing steadily over the past several...

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Investments that Hedge Longevity Risk are Surging

Investors seem to be aware of the fact that they need to hedge longevity risk . In other words, people are concerned about the risk of outliving their assets. Sales of deferred fixed annuities increased 60% in 2008. While many different types of annuity products may be used to hedge longevity risk, the longevity annuity may be optimal if the sole concern is in fact avoiding a scenario in which one outlives their money: "A 60-year-old with a $1 million portfolio but no pension might allocate...

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Advanced Life Deferred Annuity

Life Expectancy

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Retirement

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Advanced Life Deferred Annuity

Life Expectancy

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MetLife in a Position of Strength

The U.S. life and annuity insurer MetLife appears to be in a strong position relative to its competitors. MetLife is one of the leading providers of variable annuities in the United States. At a recent industry conference, MetLife's CEO explained that one of his primary concerns involves extending the company's leading position by taking advantage of acquisition and new business opportunities that have resulted from the financial crisis: MetLife shunned U.S. rescue funds and padded its finances...

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John Bogle Recommends Federal Standard of Fiduciary Duty for Money Managers

Speaking at an industry conference this past week, Vanguard founder John Bogle suggested that all money managers should be subject to a federal standard of fiduciary duty. Bogle believes that some money managers have been taking advantage of their positions at the expense of the shareholders whose interests they presumably represent. Bogle also suggested that the mutual fund industry is leaning too heavily on past returns and, as a result, that Monte Carlo simulations should be abandoned...

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Monte Carlo Simulation