With all the talk about Americans not saving enough for retirement, New York Life Insurance Company announced on Monday a new type of deferred income annuity that allows individuals to create a “personal pension” to ensure retirement income.

The Guaranteed Future Income Annuity allows individuals to set aside a portion of their retirement savings into a future guaranteed income stream that they can’t outlive.

The product works by allowing the policyholder to make an initial payment of $10,000 or more and to set an income start date in the future when they will begin receiving guaranteed income payments for life.  Between the initial enrollment date and the income start date, the policyholder can continue to make smaller payments and can defer or accelerate their income start date as personal needs change.

New York Life gives the example of a 54-year old man with no pension who invests $10,000 per year for ten years. At age 65, he will receive $9,500 for the rest of his life. New York Life points out that this doesn’t replace a pension, but it can generate an income comparable to the 2005 average private sector pension, which pays about $7,700 per year, the firm said.

For those close to retirement this type of strategy seems to make sense. New York life explains that many Americans nearing retirement place a portion of their portfolio into a five- year CD, which may yield around 1.68% for a 57-year old man. The Guaranteed Future Income Annuity could guarantee an 11.3% lifetime annual payout rate at age 66.6 for that same man.

“With the continued decline of traditional pension plans and concerns about Social Security, many Americans are facing a retirement income gap. Like a pension, the Guaranteed Future Income Annuity ensures that retirement income will be guaranteed for life – not just a bet on future returns that may or may not work out,” said Chris Blunt, executive vice president in charge of Retirement Income Security, New York Life Insurance Company, in a press release. “We believe this product is a sound solution for those seeking the attributes of guaranteed income similar to the pensions that their parents once relied on.”




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