Mark J. Mackey, president and chief executive officer of the National Association for Variable Annuities,
Joining Mackey in stating the case for annuities' role in retirement planning were Glenn Schafer, vice chairman, PacificLife,
Referring to the pending wave of Baby Boomers, the eldest of whom are turning 59-1/2 this year, Mackey called this upcoming retirement wave -- combined with "financial illiteracy, increasing longevity long past 85" and the pending crises of Social Security and Medicare - "the perfect storm."
Although some unscrupulous brokers and advisors have sold annuities inappropriately, Mackey and the other speakers maintained that there is an appropriate use for annuities in an investor's retirement portfolio to supplement income to help cover their retirement expenses.
An annuity is a long-term retirement investment vehicle combining insurance benefits, guaranteed lifetime income payments and tax-deferred savings. Secondarily, today's variable annuities offer greater liquidity, flexibility and a broader range of features than in the past, providing more options and opportunities for retired Americans.
Mackey pointed out that many retirees are living longer, more active lifestyles than previous generations, and therefore can still be considered long-term investors entering retirement.
Among other widely debated tenets in the defined contribution industry, Mackey discussed "rules of thumb" on how much a person should save for retirement basing his comments on research by AON Consulting.
"Assume you will need 100% of income, if you want to maintain your standard of living in retirement." Even if that isn't an individual's goal, Mackey continued, "at a rate of 3.5% annually, inflation could reduce a retiree's purchasing power over the years by as much as 50%."
While retirement calculators at leading mutual fund and brokerage Web sites vary widely in terms of their savings guidance, Mackey suggested that a person plan on being retired for at least 20 years. For a person earning $30,000 a year, for example, that means they should strive for a $600,000 nest egg.
And should a senior citizen be hit by an illness, "a $500,000 nest egg could quickly become $300,000," Schafer added.