Income Annuities Are Poised for Takeoff
National Underwriter (Life/Health) (10/23/00) Vol. 104, No. 43 p.8; Shapiro, David

While the financial markets have been booming, consumers have increasingly been taking regular withdrawals from their mutual funds and annuities, rather than creating a formal income payment plan through the annuitization feature offered by insurers. This can be dangerous during a market correction, which could reduce the consumers' asset base. Today's annuities are usually purchased for tax-deferred asset accumulation, but not too long ago the average annuity was only available as an income stream that could not be outlived. Some of the problems with annuities in the past were that annuitization did not offer an estate benefit, provided no liquidity, and offered no inflation protection, unless in a variable sub-account. Now, to address the liquidity problem, annuitization has income payments that can be commuted to a lump-sum settlement in case a consumer needs to liquidate his or her assets. By annuitizing into a life policy, consumers can create estate protection using the annuity income. Inflation protection is now offered by a host of variable sub-accounts. Also, a guaranteed minimum income payment provides a floor that can not go down regardless of the investment performance in the underlying sub-accounts. With these improvements in the area of product design and compensation, income annuities and income protection products are poised to see explosive growth over the next few decades.

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