For the past 20 years, annuities have been on the cusp of greatness. But now they’ve arrived, according to Douglas Dubitsky, vice president and head of product management at Guardian Retirement Solutions in New York City.
“In terms of economics of the business world, there’s never been a time that our products made as much sense as they do now and been as appropriate for our country as they are now,” he said.
According to the Insured Retirement Institute, deferred income annuities really came into their own in 2012, reaching nearly $1 billion in sales. And while that isn’t a huge chunk of change when talking about the annuities market, the IRI believes DIAs will continue to grow into 2014.
DIAs are designed to provide income later in life to protect against the risk of outliving assets. Income on DIA products can start anywhere between two and 40 years from issue, but most DIAs are elected with an income start date between five and 15 years from the date of issue.
Another reason sales of annuity products will continue into 2014 is that people are searching for the elusive guaranteed income that used to be provided through employer pension plans.
More companies now offer defined contribution plans, which are great for accumulating money, but don’t do enough when it comes to helping people turn that money into income in retirement, he said.
The educational component surrounding annuities will continue to gain in importance on both the advisor and participant sides of the industry. Most people don’t know how long they will live or how much money they will spend in retirement. Many don’t know that they can take Social Security benefits in many different ways, depending on when they start taking their benefits, he said.
People need to develop an income distribution plan like they did a wealth accumulation plan, he said.