Vanguard Group has slated a third annuity product for the fall, the Lifetime Income Program. The new product, in development in conjunction with AIG Life Insurance Co., is an immediate annuity that will allow investors to opt for fixed or variable payments for life.
Market uncertainty spurred the company into developing the new offering, according to James Gately, managing director of investment programs and services at Vanguard. "Using a portion of your retirement savings to purchase an immediate annuity can generate income to help meet basic living expenses and provide peace of mind that you will not outlive your assets," Gately said.
The annuity will allow investors to select guaranteed payment periods, so their beneficiaries will receive a payment if they die before the period has ended. Otherwise, annuities do not have any death benefit once lifetime payments begin.
For investors who elect for fixed payments, they will also have the option of an inflation rider that will annually boost payments by a set percentage. They may also select the variable payment option, which can also combat the rise of costs due to inflation. At the start of the contract, they distribute their lump-sum payment among different funding options, which are then used to determine the size of the monthly payment. Investors electing the variable payments must bear the risk of market fluctuation, however.