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.

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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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

Credit Risk

Interest Rates

Annuity Ladder

Dollar Cost Averaging

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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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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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