The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
Business Editors/Financial Editors
NEW YORK--(BUSINESS WIRE)--October 2, 2008--To help individuals understand how to create a reliable, sustainable source of retirement income and make the most of their assets, MetLife today launched an innovative online Income Annuities Guide. The interactive online tool demonstrates how a retirement portfolio including an income annuity can help boost spending power as well as provide more guaranteed income.
Many experts typically recommend a 4% annual withdrawal rate from an individual’s savings to avoid running out of money in retirement. However, a 2008 survey conducted by the MetLife Mature Market Institute found that nearly 70 percent of consumers overestimate how much they can prudently withdraw from their retirement savings, and a startling 43% think they can withdraw 10% or more.
“Turning your savings into retirement income is easier said than done,” said Robert E. Sollmann, Jr., Senior Vice President of MetLife’s Retirement Strategies Group. “During an individual’s working years the focus is on return on investment, or ROI. But managing income in retirement involves generating, maximizing and sustaining a reliable income for life. In retirement, the new ROI is reliability of income. The events of recent days and weeks in our financial markets and continuing economic uncertainty further reinforce the value of including guaranteed income solutions within individuals' retirement portfolios.”
The MetLife Income Annuities Guide, available at www.metlife.com/incomeannuitiesguide, brings to life for consumers the value an income annuity can have in their retirement income plan. Through examples and interactive scenarios, the Guide demonstrates how an income annuity can help people stretch their retirement assets further.
“A combination of investment and insurance approaches can be even more effective than investment approaches alone for creating retirement income and optimizing reliability of income,” Sollmann continued. “Our focus is on educating consumers– through tools like the Income Annuities Guide – about how insurance solutions can work in combination with their savings and investments to help them create more income throughout retirement.”
The Guide details the power of income annuities in retirement and illustrates this with examples showing the relevance and impact of an income annuity as part of a retirement portfolio. For example, a 65-year old male with $500,000 in savings and investments, using what many experts believe to be a safe withdrawal rate of 4%, would receive $20,000 annually before taxes.*If the same person with $500,000 in retirement assets allocates a portion to an immediate income annuity ($165,000 or one-third in this example), the annuity would produce guaranteed income of $11,900**.If the remaining $335,000 assets in savings and investments (two-thirds) were then withdrawn at the 4% rate it would provide an initial annual income of $13,400. Together, this individual would have a total income of around $25,000 ($11,900 + $13,400) annually before taxes, or 25% more.The user also has an opportunity to select different types of retirement scenarios and see the potential outcome with and without income annuities.
“The MetLife Income Annuities Guide is the most recent addition to a suite of online tools designed to help individuals self-assess, learn and plan for retirement,” said Melody Dippold, Vice President, Retirement Strategies Group. “The tools are an integral part of our overall approach for building awareness among consumers about how insurance solutions can help them make the most of what they have in retirement.”
The MetLife Income Annuities Guide complements MetLife’s Social SecurityDecision Tool, Retirement IQ Quiz, Life Expectancy Calculator, Retirement Income Planning Tool, and Long-Term Care Cost Calculator. These tools, in addition to retirement articles and research from MetLife’s Mature Market Institute can be found at www.metlife.com/retirement.
*This 4% annual withdrawal rate is based on Ibbotson Associates’ modeled portfolios using 50% large-company stocks and 50% intermediate-term bonds adjusted annually for inflation.
**Income annuity calculation assumes the Annuity 2000 Mortality table and a 4% interest rate.
Celebrating 140 years, MetLife is a subsidiary of MetLife, Inc. (NYSE: MET), a leading provider of insurance and financial services with operations throughout the United States and the Latin America, Europe and Asia Pacific regions.Through its domestic and international subsidiaries and affiliates, MetLife, Inc. reaches more than 70 million customers around the world and MetLife is the largest life insurer in the United States (based on life insurance in-force).The MetLife companies offer life insurance, annuities, auto and home insurance, retail banking and other financial services to individuals, as well as group insurance, and retirement & savings products and services to corporations and other institutions.For more information, please visit www.metlife.com.
Income annuities issued by Metropolitan Life Insurance Company,New York, NY 10166 and MetLife Investors USA Insurance Company, Irvine, CA 92166 and in New York only by First MetLife Investors Insurance Company, New York, NY 10016.