One of the most noticeable trends in the financial press is a growing awareness by writers and commentators that the risk of living too long is now a far greater reality for most people then dying too young.
As most people know, the foundation of my business with Wahlstrom & Associates is the sale of fixed annuity products such as structured settlement annuities, SPIA's, and variable annuity products that all provide for guaranteed income for life. Over the last 25 years i'd grown use to financial writers and commentators constantly attacking annuities as over priced, with long surrender charges with excessively high commissions and flawed sales practices. A lot of that criticism was deserved as a great deal of the products and sales practices were poorly priced and abusive to the client with extended surrender charges and shoddy investment choices.
However, the insurance industry isn't totally brain dead and they recognize the demographic tidal wave about to hit our nation, which is a flood of retirements and an insufficient amount of savings to provide for life long income for most people.
A great article from one of the better personal finance writers is available in today's Wall Street Journal. Again, you might need to register or subscribe but if you are in the settlement business how can you not have a subscription to the WSJ and possibly stay informed. Johathan Clements writes today on the "age old problem of how to make sure your money last as long as you do." His reporting discusses mortality trends, which in a nut shell state that the average man lives to be 82 and the average woman lives to be 85 according to most studies. That's the AVERAGE age. That means a substantial cohort will live well into their 90's and beyond. According to his analysis the biggest risk people face is running out of income over these extended life spans.
As we all know, and the general public is starting to figure out thanks to unbiased writing such as this, is that the ONLY vehicle that transfers the risk of living too long to another party is a life annuity. Now, you can choose a structured life annuity if you are a personal injury victim, you can choose a life annuity for your legal fee if you are an attorney, you can choose a life income on your real estate sale via the structured sale annuity for real estate and you can choose a variable life annuity for your income if you want to continue to stay invested in equity markets. The choices available to investors, injury victims, trial lawyers, real estate investors and average Americans has never been greater.
The moral of the story: If you want Life time guaranteed income and need to maximize the assets you have, no other product other then the life annuity can get you that. It's the foundation of planning now that corporate pensions are gone, and I encourage anyone facing a decision as to what to do with their investments as they approach retirement to be reading our commentary and asking questions to learn about what your options are.