Question: Are guaranteed lifetime withdrawal benefit (GLWB) features in fixed and variable annuities still in high demand? Why or why not?
“There is great demand for the GLWB feature among anyone who has accumulated savings for retirement and is now getting to the point where he or she cannot afford to lose their next egg. For them to have greater opportunities for a guaranteed income stream, they need products that give them upside potential and protect against a downside market. For that reason, the GLWBs are in high demand in variable annuities. These consumers don’t just want the benefit. They ask for it by describing what it is they want their retirement product to do. Of course, the issuing company’s financial strength is key to selecting these products.”
–Randy Kaufmann, Kaufmann and Associates, Camp Hill, Pa.
“Retirees are looking for fixed income. So the variable annuity with withdrawal advantages is in demand, and it will continue to be in demand, particularly for people age 50 and up. That is because of the GLWB guarantee, which protects the income regardless of what the market does. It’s the same demand that the industry has seen in the past several years. “
–Randy Jensen, Principal Financial Group, Kearney, Neb.
“The GLWB is still in demand, but the sales are waning because of the fees and because of the reductions that carriers have made in the benefit levels following the recession. If interest rates go back up, I think the single premium immediate annuities (SPIAs) and the deferred income annuities (DIAs) will take over the market for income solutions. As Curtis Cloke puts it, people will be “buying income and investing the difference.” It’s happening right now, in fact. People can get more income from SPIAs and DIAs than they can with a variable annuity with a GLWB, assuming the products are funded with the same amount of money. Put another way, people have to tie up more money in variable annuity with the GLWB to get the same income as they would with a SPIA or DIA. In addition, consumers can get inflation riders with a SPIA or a DIA. By comparison, if they can find an inflation feature on a variable annuity with a GLWB, the average fee and policy expenses will make that option unattractive.”
–Jim Silbernagel, Silbernagel & Jasen, Kewaskum, Wisc., and host of NAIFA ClientCast webinars