Annuities’ alphabet soup: choosing the best option
April 8, 2016 by Scott Stolz
There’s a multitude of terms to digest when it comes to annuities.
Despite the fact that annuities are uniquely designed to provide guaranteed income for life, over the last 30 years, they have been used mostly as a means to provide tax-deferred accumulation.
The commonly held belief has been that as the baby boomers continue to age, much of the $3 trillion-plus in estimated annuity assets will eventually be used to generate income. Twenty years ago, the expectation was that much of this money would flow into immediate annuities. However, given that immediate annuities have never captured more than 3 percent of industry sales, insurance companies have found it necessary to develop other ways to create income.
Advisors today must choose between an alphabet soup of income options, each with its own industry-adopted acronym. So how does one decide between SPIAs (single premium immediate annuities), DIAs (deferred income annuities) and GMWBs (guaranteed minimum withdrawal benefits) — especially now that the latter can be added to fixed and indexed annuities as well as variable annuities? Let’s first look at the unique characteristics of all of these options. Click HERE to read more…
