By Cyril Tuohy
Northwestern Mutual announced it will allow investors to fund an immediate annuity and a deferred income annuity using personal savings outside of qualified retirement dollars.
The changes affect the Select Portfolio Immediate Income Annuity and Select Portfolio Deferred Income Annuity. Both belong to the company’s Portfolio Income Annuity product suite and have sold well since their introduction in 2012, the company said.
When launched two years ago, the products were only available for tax-qualified dollars — for example, dollars coming from an individual retirement account or a 401(k) savings plan.
David Simbro, Northwestern Mutual’s senior vice president of life and annuity product, said the two annuities were expanded to meet the needs of retirees and pre-retirees looking for guaranteed income.
“While there’s growing awareness of the need to plan for long-term financial security, there’s often uncertainty about how to do so, especially when it comes to navigating longevity risk and the concern about outliving one’s retirement savings,” Simbro said in a news release.
The Portfolio Income Annuity product suite has generated more than $1 billion in sales, the company added.
Fixed annuities have sold well over the past year as interest rates have gone up. Analysts predict rising interest rates as the Federal Reserve cuts back on its bond-buying program, which has kept interest rates low by historical standards.
Second-quarter sales of deferred income annuities rose 33 percent to $710 million compared to the year-ago period, and second-quarter sales of immediate income annuities rose 37 percent to $2.6 billion compared to the year-ago period, according to LIMRA.
In the past, annuities have been criticized for being inflexible and expensive. Recently, though, insurance carriers have added more options to annuity products in an effort to appeal to a broader swath of Americans who are in pre-retirement or already retired and in need of guaranteed income.
Annuities have traditionally been considered by people in their 50s or 60s, but surveys indicate that many younger Americans are now concerned about financing their retirement.
Northwestern Mutual’s 2014 Planning and Progress Survey found that 26 percent of adults 25 and older do not believe they will be financially prepared to live to the age of 75 based on their current financial condition, future prospects and long-term plans. Nearly 40 percent don’t believe they will be financially prepared to live to 95 years of age.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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