With more pre-retirees worried about outliving their retirement savings, guaranteed retirement income payments are seeing a new spike in interest.
Last July, New York Life introduced its Guaranteed Future Income Annuity, and sales have been better than expected. Since its introduction, GFIA sales have exceeded $500 million in premiums, targeting pre-retirees between 55 and 65 planning to retire in the next 10 years.
Through GFIA, policyholders can set a specific date in the future when guaranteed income payments will begin for the rest of their lives. If personal needs change, policyholders can purchase more future income by making additional payments or defer or accelerate the income start date.
Although the GFIA is demonstrating its primary function as creating retirement income, the age at which policyholders are beginning their payments differs. In non-qualified accounts and Roth IRAs, 66% of GFIA purchasers choose an income start date before the age of 70.5, and 34 percent have a start date between the ages of 70.5 and 85, showing a desire for income at a later age.
“It is important to note that when pre-retirees have no restrictions around income start date, they are using the flexibility that this product affords them to tailor the policy to meet their specific needs,” Matt Grove, vice president of annuity business, said.
New York Life officials said about 66% of purchasers use tax-qualified money to fund their GFIA, essentially money they have already put aside for retirement in 401(k)s or IRAs.
Kylie Hennagin writes for Financial Planning.