President Obama has chosen life annuities as the official retirement vehicle for Americans to guarantee them a lifetime income. In an article published in the New York Times on January 31st Unloved Annuity Gets A Hug From The President the President’s team said that a life annuity can give Americans a better shot at a more secure retirement.
One of the main problems is that the word "annuities" covers a wide range of products, the more notable of which are not retirement vehicles. The phrase "variable annuities" covers mutual fund investments with perhaps a floor on losses provided by some insurance. On the other hand "life annuities" refer to a level guaranteed income for life. So defining that the Government wants a life annuity, where payments are for life, is perhaps the best place to start. The client could pay into a life annuity vehicle and, at retirement, draw the guaranteed life annuity income.
Should you buy a life annuity? Well that depends on whether you are fed up worrying about interest rates on certificates, stock market volatility and excessive investment charges. A life annuity brings you peace in the form of a check every month to help meet your expenses. If your living costs are pretty well fixed, a life annuity which brings a guaranteed cheque each month may be the answer.
And a life annuity can cover your spouse and be guaranteed long enough to provide some cash for your beneficiaries. So perhaps the President has done his homework when he instructed his team to concentrate on life annuities.
