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Annuities Create Lifetime Income Stream
The first Baby Boomers turned 65 earlier this year, starting the largest retirement wave this country has ever seen. Over the next 15 years they will be retiring at a rate of 3-4 million per year. Baby Boomers are redefining retirement - not only what it means to be retired - but also with the financial products they use to ensure they have enough money to enjoy life the way they want to live it.

Today, more and more Boomers are purchasing income annuities. Concerned by the volatility of the stock markets over the past few years, many are eager to find financial products that provide a steady stream of income, guaranteed for as long as they live.

For those Boomers, income annuities are a great way to close the gap between their monthly retirement expenses and the income they receive from Social Security or part-time work. For others, who are still a few years or more from retiring, an income annuity represents a great way to create their own “pension-like” retirement income. Single premium annuities are often funded with a lump sum premium from sources such as a 401(k) plan rollovers, investments, or an inheritance , while other annuities allow for flexible premium payments over time.

Income annuities, in general, have been featured in influential financial publications, most recently in the Wall Street Journal and the New York Times.

There are two basic types of income annuities-- immediate and deferred. New York Life has offered an immediate income annuity for decades and in May 2011, debuted a deferred income annuity. Each product provides a lifetime guarantee on the monthly income it generates, no matter how the financial markets perform. New York Life is also the acknowledged market leader, ranking as the number one provider of income annuities in the country for the fifth consecutive year.

One reason for income annuities’ growing popularity is their potential to meet three specific challenges that will characterize retirement, not only for Boomers, but for future generations as well. The three challenges are:

1. Accumulate a substantial amount of their own retirement assets: - Many Boomers are the first to be cast adrift from traditional pension plans and encouraged to build their own boat, using 401(k) plans and other retirement savings vehicles. Some heeded the call, others, not so much even as many believed additional warning signals about the long-term solvency of Social Security grew louder.

Academic studies suggest that most retirees need about 78%-94% of their pre-retirement income, adjusted for inflation, to maintain the same standard of living in retirement. Unfortunately, many people who know they need to save never do and every $100 failed to set aside today can cost $1,000 or more in future retirement income thanks to the value of compounding.

2. Overcome the effects of two burst economic bubbles: Many Boomers have felt the shattering effects of having two economic bubbles burst on them within a 10- year period, in many cases decimating their retirement accounts. The Great Recession clearly hit Baby Boomers at a vulnerable time, when they were close to retirement or at least should have been preparing for it. Baby Boomers have lost money on investments and endured damage to their household finances than any other group. So just when they may need to accumulate assets rapidly, Boomers are understandably skittish about potentially risky equity markets. Believing they have been burned twice, many are determined they won’t get fooled again and are seeking certainty in their investments.

3. Plan for a retirement that could last 30+years: Many Boomers who retire in their late 50s or early 60s can expect to live far longer than any previous generation. In fact many will spend more years in retirement than they were in the workforce. This creates a heightened need both for accumulating assets and making certain they can last a lifetime. Successfully negotiating both, could mean the difference between enduring retirement and enjoying it.

Answering the Bell

The retirement issues below are among the most pressing facing Boomers:

1. Accumulating assets,

2. Insuring safety of those assets

3. Making the assets last a lifetime

Income annuities can help to answer the bell on all of them. And consumers who have purchased income annuities tend to agree.  Boomers who own insured retirement products have a higher confidence in their overall retirement expectations, with nine out of 10 believing they are doing a good job preparing financially for retirement.

Key Differences

While both immediate and deferred income annuities generate guaranteed lifetime income, there are distinct differences between the two products. A single premium immediate annuity, as the name implies, begins to provide income immediately, usually less than a year after it is purchased. It is usually purchased with one large lump sum premium, from a 401(k) plan rollover or other investments. Immediate annuities are generally best suited for someone who is already retired or will in the very near future. New York Life’s immediate annuity – the New York Life Lifetime Income Annuity -- offers a number of popular payout options. With a deferred lifetime annuity, people make an initial premium payment, but don’t begin to receive income payments until a date set in the future New York Life’s deferred income annuity , the New York Life Guaranteed Future Income Annuity7 is generally best suited for someone age 55-64 who is still working and wants to create their own “pension- like” retirement income. They can also can continue to make premium payments to the annuity, the minimum initial premium is $10,000 and the minimum subsequent premium is $100.

It can also be used to help retirees protect their assets should they live beyond their life expectancy, one of the reasons this product is referred to as “longevity insurance,” is because the income start date can be delayed until later in retirement

When deciding to purchase an income annuity, one factor all financial professionals stress is to stick with companies that are highly rated for financial strength and claims-paying ability. New York Life receives the highest ratings currently awarded to any life insurer by all four major ratings agencies.

New York Life’s primary responsibility is to provide financial security to current and future policy owners by maintaining long-term financial strength. Through every economic turn in the road, our policy owners needs are our first consideration.

To help you decide which income annuity best fits your circumstances, at no charge to you, a New York Life Agent — professionally trained and experienced — can help you analyze your needs and recommend appropriate solutions. Request a no-obligation review with a Andy Vass, New York Life agent, at 847 909-7500.