Annuity

An annuity comes in many forms, but a simple definition is that an annuity is a contract that converts a sum of money into a series of periodic payments for an agreed upon period of time. An annuity can be thought of as a financial vehicle that converts a pool of money into a stream of income. Annuities are most useful in addressing the financial planning needs of people in or approaching retirement. Annuities are unique in the financial world because they can provide protection against the risk or outliving one’s assets (longevity risk) by guaranteeing income payments in perpetuity or any other selected amount of time. Annuities can be viewed as a type of personal pension plan. Social Security is similar to an annuity in that money contributed over the course of one’s working years is converted into a series of periodic payments that provide income during retirement.

Retirement Income Product Innovation a Possibility in Wake of Financial Crisis

The financial crisis may have one unintended consequence that would prove beneficial for millions of retirees. There is a renewed focus among providers of retirement income products in the wake of the financial crisis. The crisis has provided an opportunity for the remaining life and annuity insurers and asset managers to rethink their product offerings. The result could be a wave of innovation that is focused on retirement income and asset decumulation rather than asset accumulation and...

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Watch-Out for Any Annuity Pitch that is Tied to a Reverse Mortgage

The cross-selling of annuities and reverse mortgages is problematic to say the least. There is clear potential for conflict of interest and pitfalls for elderly customers. Consumers should be on the look-out for any sales pitch that ties the two products together. There are, in fact, laws that define the need for separation of the two products during the marketing and sales process: Under the Housing and Economic Recovery Act of 2008, a lender or anyone else can’t require a HECM (a...

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Chief Investment Strategist from TIAA-CREF -- Think of Income When Considering Annuities

Annuities are all about producing income that will last according to P. Brett Hammond. Hammond is the chief investment strategist for TIAA-CREF asset management. In Hammond's view wealth creation and asset accumulation are fine, but producing income should be front and center when thinking about retirement: There's nothing wrong with wealth creation. In fact, it's fabulous. But the problem is if you're only thinking about wealth creation for retirement income, you may forget about all the other...

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