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Increased Retirement Income and Client Bequests with SPIA Sales

05-01-2010

The results from a new study conducted by Milliman, and released by NAVA demonstrate that including a single premium immediate annuity (SPIA) in a retirement portfolio not only provides guaranteed retirement income for life, but it can actually increase the average bequest from retirees to their heirs by up to 41 percent.

Looking at over ten thousand hypothetical retirement solutions, Milliman discovered an unexpected trend.

“We were confident that moving some retirement assets from the mutual fund only systematic withdrawal program into a SPIA would significantly reduces the chances of our hypothetical couple running out of money in retirement, but we were surprised to see that it also increased their average bequest,” said Tim Hill consulting actuary and principal, Milliman Inc. “It really is a matter of leveraging each product’s strengths. When it comes to providing income that can not be outlived, it is hard to beat a SPIA. Our analysis showed that the SPIA would cover the vast majority of the couple’s early year income and a significant piece of the later year income goal. Meanwhile, the remaining amount in the mutual funds is largely left to do what it does well, namely enable long term growth, which provides for the increasing income goal, and ultimately, a bequest.”

While some may argue that annuities limit the money annuity holders have available to leave to their heirs, this study turns the table the effectively demonstrates that incorporating annuity income into a retirement portfolio can actually free up more money for a bequest.

For more information on this study, or to discuss how to leverage the strengths of both annuities and mutual funds to cover your clients financial retirement needs as well as the needs for their families in the future contact your BUA Brokerage Sales Consultant.