Low Annuity Rates Hit Retirees, Average 9.2% Loss
All of this apparent pushing on a string has made earning adequate interest income a continuing struggle for many retirees. Annual personal interest income, according to the Federal Reserve Bank of
Meanwhile, retirees who are purchasing annuities today are also earning less - in some cases more than 10% less - than they were earning on the same deposit amounts just one year ago, according to Comparative Annuity Reports, a monthly gauge of the performance of Single Premium Immediate Annuities, or SPIAs. New annuity buyers who saw the largest drop in income were females age 60, whose monthly payout was 12% lower year-over-year when compared with similar annuities purchased last August (see attached
One reason for the drop in annuity income results from the fact that insurance companies, the manufacturers of these retirement products, typically invest up to 70% of their general portfolios in fixed income securities - most of which are issued by public corporations.
Because these corporate bonds follow interest rate trends, the downward movement of rates in general has impacted the income received by insurance companies. And, while rates on corporate bonds are higher than those of the 10-year Treasury Notes, the overall trend continues to steadily decline for all interest rate instruments.
The August issue of Comparative Annuity Reports reported a continuation in the declining payout trend for the 10-year period certain annuity. Overall, payouts on this annuity were 3% lower this month than they were a year ago (see attached Monthly Annuity Income Chart).
However, the greatest damage to annuity income payouts year-over-year were in the life annuity categories:
Males age 60, down 11.24%
Females age 60, down 11.69%
Males age 65, down 9.82%
Females age 65, down 10.44%
Males age 70, down 8.17%
Females age 70, down 9.03%
Males age 75, down 6.73%
Females age 75, down 7.24%
When viewed as return per
For more information about income and interest rate trends for annuities, visit http://www.immediateannuities.com. By using the instant annuity calculator located on this website, it is also possible to determine the amount of guaranteed income that will be received based on the buyer's state of residence, age, and dollar amount invested.
Comparative Annuity Reports is a free monthly newsletter which has been tracking annuity trends since 1985.
Read the full story at http://www.prweb.com/releases/interestrates/declining/prweb9855825.htm
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