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Sheryl J. Moore

Sheryl J. Moore is president and CEO of the life and annuity market research firm of Wink, Inc. Her companies provide competitive intelligence, market research, product development, consulting services and insight to select financial services companies. Moore may be reached at

A Tale Of Three Annuities


I get frustrated, frequently, by the regular barrage of negativity that surrounds most of the “news” that I read on annuities. If it isn’t a swayed account from so-and-so’s beneficiary, talking about how an annuity wasn’t suitable for their deceased parent, it is a hack job from some media outlet that caters to mutual fund advertisers. We have negative annuity media in print, and we have negative annuity media online. Heck—the annuity industry even has the distinction of being the subject of the only Dateline: To Catch a Predator that wasn’t about pedophiles.

Believe it!

It would just be nice to hear some positive press about annuities sometimes. This issue, I am doing my best to put up or shut up. Here’s my attempt to get some positive accounts about annuities into the mainstream media (or at least through the Broker World distribution network).

A Life Insurance Windfall
I will never forget being eight years old and touching my maternal grandmother’s cold, dead hand in the casket. As a first grandchild, my relationship with my grandparents was very special; I was the favorite. My parents were teenagers, and my grandparents helped to raise me. Specifically, I was doted upon, and rarely told “no” by my grandma, Norma. I was with her on the day that things went downhill. She complained of a headache that progressively was getting worse, and the next thing we knew, they told us that she had breast cancer. It had spread through her lymph nodes to the rest of her body. She died four days later. It was quick, but that didn’t negate all the pain we were feeling about losing a family member in her early 50s.

Fortunately, Grandma had life insurance through her job at the credit union. It wasn’t a large sum, but it was enough to pay the funeral and burial expenses and still have a small sum left over.

Grandpa’s Annuity
Grandpa Max still had a long time to live when Grandma died. When the insurance company paid Grandma’s death claim to him, they mentioned that he had an option to take his remaining life insurance death benefit, net of his expenses, and use it to purchase an annuity. Grandpa didn’t realize that he had purchased an annuity though. He said that “the insurance company has to make monthly payments” to him. (Um, that’s an annuity, Grandpa…) Regardless, he had peace-of-mind about his retirement because of the payments that the insurance company was going to have to make to him.

And the annuity did its job! He lived on a fixed income, and he knew that he could rely on his annuity payments. He never complained about money being tight. It was invaluable for me to see how the annuity made Grandpa’s retirement more comfortable.

Grandpa took payments from that annuity for 27 years! Toward the end of his life, when I brought to his attention that the payments he was receiving were from an annuity, he laughed. He was absolutely tickled that he had “honestly cheated the insurance company,” by getting back in payments more money than he had paid for the annuity. “That thing was the best financial decision I made in my life!,” he declared.

Grandma’s Annuity
Not many years after Grandma passed away, Grandpa married a woman that was 20 years his junior, Grandma Claudia. She was so much like my first grandma that I often smiled about it. How could Grandpa have found the love of a lifetime, twice in a single lifetime? Grandma Claudia took care of my Grandpa for nearly 25 years; she had earned her title of “Grandma.”

Claudia was loyal and had worked at CenturyLink as a telephone operator since she was a teenager. When it came time for her to retire, she had more than a million dollars in her 401(k)! I wish I could say that Grandma asked me what to do with her money when she separated from service, but she didn’t. And still, that nice man from the local insurance company put her money into an annuity that “guaranteed seven percent every year!” Grandma might not have understood her variable annuity with a guaranteed lifetime withdrawal benefit completely, but she knew that she was going to get a payment every month until she died.

And she did. Grandma’s only income was her Social Security checks, along with her annuity payments. She lived on a fixed income, but she never worried about money. She always knew how much she was going to receive each month, and she budgeted for it. She was lighthearted about her outlook on retirement. Even when the stock market dove in 2008, she didn’t worry. Knowing that the value she would receive payments upon grew at seven percent annually, she never flinched. She died of COVID-19 recently. Up until that day, she would tell you how useful that annuity had been.

My Annuities
I may be the exception to the rule, as I purchased my first annuity before I was 30 years old. I own several of them. I am concerned about outliving my income in retirement. After all, the first person to live to be 150 years old is already walking the Earth today (even though I hope it isn’t me!). I will likely live in retirement for at least 20 years, so those annuity payments will come in handy. I find my annuities valuable for another reason though. I am saving for retirement, as a risk-averse individual. My annuities give me peace-of-mind by knowing that they will never decline in value. Each year, I receive my annual statements, give them a once-over, and then file them in the file cabinet. If I earned zero interest in any given year, I think to myself, “Good! I didn’t lose anything!” My friends and neighbors might not be able to say the same. Last year,I earned more than 14 percent on one of my annuities. That was a good thing too!

Each person’s reason for finding value in their annuity purchase may be different. However, studies have shown that one thing is universal amongst annuity purchasers—they have happier retirements. And I, for one, think it would just be nice if we could hear more about that.

My, How Annuities Have Changed!


By the time that you read this, variable annuities will be older than my mother, indexed annuities will be the same age that I was when I had my third child, and fixed annuities will be older than anyone in my lineage, per It is hard to believe that these innovative retirement income products have been around for thousands of years! (Though just the number of new iterations on the indices offered on indexed annuities over the past decade is enough to age me decades.) And although I haven’t been developing annuities for the entire 22-year period that I’ve worked in this business, this ol’ gal can still remember how annuities looked when I first hit the deferred annuity scene.

Trust me when I say that your annuity choices back then were far different than your annuity choices now.

Fixed Annuities
People think that there aren’t many ways to innovate on a fixed annuity. After all—a fixed annuity is essentially like a Certificate of Deposit (CD). And we all know how CDs work. Which CD do you normally purchase? The one crediting the highest rate—right? Well, this is where fixed annuities were too, just a couple of decades ago.

Today, however, fixed annuities actually offer many optional benefits and features. There are fixed annuities with Guaranteed Lifetime Withdrawal Benefits (GLWBs), which guarantee a lifetime of income without (gasp!) annuitization. So, instead of paying for that guaranteed income with a lifetime of inflexibility, you only have to pay an annual charge to have the annuitization-like benefits of the income rider. Not too shabby!

There are fixed annuities with other riders too. You can purchase optional benefits like bonuses or enhanced death benefits. Heck—one of my favorite fixed annuity features today gives the purchaser the ability to earn an extra [0.25 percent] annually, if [XYZ Index] goes above [1,000]. But one of the more prominent fixed annuity features has become a rider that can give you annual penalty-free withdrawals of 10 percent or more on your annuity.

Ten percent or more?!?

The nice thing about fixed annuities two decades ago was that this used to be a standard feature. (So for today, picture a car; but without cup holders here.) Now, liquidity costs so much, and interest rates are so low, that five percent annual penalty-free withdrawals are the norm. sigh Those were the good ol’ days!

Variable Annuities
Let’s just say that guaranteed living benefit riders on variable annuities (VAs) were “not a thing” back 20 plus years ago. Meaning—most of them didn’t exist. Never mind that these optional benefits typically end up on nearly three quarters of VA sales. More than two decades ago, a lifetime of guaranteed income via a Guaranteed Lifetime Withdrawal Benefit couldn’t be secured on these risk money products. You wouldn’t have the comfort of knowing that your annuity’s value would accumulate to a stated, guaranteed amount because of a Guaranteed Minimum Accumulation Benefit back then. you couldn’t guarantee anything on a variable annuity, outside a Guaranteed Minimum Death Benefit. And…well, the fees.

Things changed dramatically with variable annuities when the market collapsed in 2008. The high potential type of annuities underwent a metamorphosis. Many companies quit selling VAs. A slew of products were pulled from product manufacturers’ shelves. Their fees practically doubled overnight. Their optional death and living benefit riders were now only available with restrictions on the funds the annuitant chose. And the popular living benefits saw roll ups decline while their annual fees escalated.

Many advisors feel that they “cannot sell” the VAs that are available to their clients today, as they seem so inferior to the products that the advisor was selling just 13 years ago. Indeed, the past quarter century has been a rollercoaster for variable annuity sales. Relatively speaking though, the products that are available today are some of the most reasonable VAs that I’ve ever seen.

Indexed Annuities
When it came to indexed annuities, let’s just say that the words “annual reset” were not a regular part of the indexed lingo before the turn of the century. Just about every one of the very few indexed annuities that I had to choose from had a term end point design (or what many may call “long term point-to-point”); most on a ten-year chassis. Why? Well, conceptually, the longer that an insurance company has to invest the annuity purchasers’ premium, the greater potential for growth on the monies. So, if you are investing the money over a seven-year period you are likely to earn much more than investing the money over a one-year period. This is why participation rates and caps on long-term point-to-point crediting methods are so much more attractive than those offered on annual point-to-point crediting methods.

Yet, you need to consider why term end point designs hit the wayside when annual reset crediting methods came into play. If I own a ten-year annuity with a ten-year term end point crediting method, and take my 10 percent penalty-free withdrawals every year, how much interest can I earn at the end of the ten-year period? Nothing! Zilch. Zero. Nada. Indexed annuities only credit indexed interest on the monies remaining in the contract, so term end point designs such as these became less popular when the masses cried-out for the liquidity of annual reset crediting methods. And truly, we didn’t see it as a big compromise because many annual reset crediting methods offered double-digit caps at the time (remember that?!?).

Yet the biggest area of change in the IA market has been the number of indices available upon which to earn your indexed interest. When I looked at the handful of choices that I had for indexed interest crediting decades ago, all of my choices were based on the growth of the S&P 500, with only a few exceptions. While this may still be the most dominant index, and certainly the most recognizable, the trusty Standard and Poor’s 500 now has 132 competing indices from which indexed annuity purchasers can choose to earn their interest! The vast majority of these indices, labeled as “hybrids,” have been introduced to the market in just the past nine years alone. And although my potential for gains is about even, regardless of my selection of index (over a long period of time), these are all choices that just weren’t available a couple of decades ago.

I’ve bought a couple dozen annuities over the past couple of decades, but the last purchase was nothing like the first. Not only have I changed, but the products available to me have changed as well. And while you may sit and dream about “what used to be” when it comes to annuities, you need to stop thinking that the products that you have available to you today aren’t “competitive.” Sure, the withdrawal privileges have shrunk, and so have the caps. The premium bonuses are less, and so are the commissions. But while you may call these products comparatively less competitive than their 20-year old brethren, your prospects don’t remember when annuities were just about the credited rate, or didn’t have fund restrictions…heck—they don’t remember when they had double-digit caps.

However, they do know that today’s potential for earnings is a heck of a lot better than the 0.17 percent interest that they can earn at the bank.1

Annuities may be less attractive in some ways, but they now offer more choices, flexibility, and guarantees. Now let’s forget about all of these changes and go out there and sell some competitive retirement income, will you?

1., average national CD rate
2. Wink’s Sales & Market Report, 4Q2020

Americans Are Demanding Annuities

I have seen the demand for annuities grow stronger and stronger over the past couple of decades. When I talk about this with colleagues in the annuity industry, they think I am being facetious. What? You haven’t seen the same? Well, let me show you about the demand for annuities from my own perspective.

The United States is in a retirement crisis. For the next 10 years there will be an average of 10,000 people turning 65 each day.1 It turns out those baby boomers are really earning their title as “the greatest generation!” Look forward to more retirement communities and nursing homes in a neighborhood near you!

In a recent survey, 57 percent of respondents had less than $1,000 in savings.2 And I thought I was running behind on my saving for retirement! Someone wise once told me that you should always have at least three months’ salary saved in your savings account. And that sage advice puts me ahead of nearly three-fifths of Americans? That’s plain crazy.

Approximately one in four Americans aged 65 and older relies on Social Security for 90 percent of their family income.3 I am certain a career in financial services has swayed my knowledge of this topic. If I am not working with someone asking about annuities, it is someone talking to me about using life insurance to subsidize their retirement income. Yet, I know that early in my career someone told me that Social Security is only intended to provide for 40 percent of your retirement income. That said, it appears that most Americans have never heard that (and therefore, are not prepared for it), or they haven’t the ability to prepare for this despite having this knowledge.

The 2014 report from the Social Security program trustees indicates that the trust fund reserves will fall to a point that Social Security will not be able to pay full retirement benefits starting in just 13 more years.3 This is what everyone is bellyaching about—“I’ve paid in for [X] years, and they aren’t going to give it back to me?” I don’t know about you but, as a woman in her mid-40s, I feel a little lied to in respect to this. I’ve been paying into Social Security for more than 30 years. I get those statements from the Social Security Administration each year telling me what my estimated Social Security check is supposed to be. So, I’m potentially going from about $2,000 per month for the rest of my life (as of today) to absolutely nothing in retirement? That is certainly going to put a dent in my plans to run off to Sweden in 15 years.

The top fear of Americans is running out of money in retirement.4 In fact, this phobia is greater than the fear of death or public speaking! While this made me laugh (because I love the attention of speaking in front of a crowd!), it makes perfect sense. For those who are 65 today, a man has a three percent chance of living to 100, a woman a 5.9 percent chance, and at least one member of a couple an 8.7 percent chance. These percentages rise over time, so the comparable numbers for someone age 25 today are 6.1 percent, 10.2 percent, and 15.7 percent, respectively.5 Now, those statistics may seem relatively insignificant, but if you are part of the three percent that is scary as all get out.

And while most consumers do not know that annuities are the only financial services product that can guarantee a minimum income amount for the rest of the purchaser’s life, they do know that they need some kind of help navigating retirement. In fact, 90 percent of boomers believe an important function of their financial professional was to “ensure the safety of a significant part of my nest egg.”6 Another 84 percent said their financial professional should “make sure I have adequate and guaranteed income for life.”6

So, like I said, the wares in your toolbox are highly sought after by your prospects. Americans are demanding annuities! There is just one problem—they hate the word “annuity.” In a recent survey, 35 percent of respondents would be less interested in an annuity that offers guaranteed lifetime income, as compared to an unnamed product that offers guaranteed lifetime income.7 So really the objection isn’t the product, it is how you frame it. If you describe what the annuity does, rather than what it is, you are likely to receive a much warmer response. If you can listen to your prospects’ concerns, and provide feedback indicating that you have an instrument that can offer them a lifetime of guaranteed income, you are meeting the demands of the masses. Go forth, educate, and the sales will come.


  1. Pew Research Center.
  2. 2017 GOBankingRates survey.
  3. Social Security Administration.
  4. New Generation Ahead Study, Allianz Life 2017.
  5. U.S. Social Security Administration, Office of the Chief Actuary.
  6. Reclaiming the Future Study, Allianz Life 2016.
  7. Fifth annual Guaranteed Lifetime Income Study, Greenwald & Associates.

The Fixed Annuity Market, Analyzed

It is hard to believe how very dramatically things have changed in our world in just a short three months. At this time in February I was doing a keynote for a group of insurance company executives who focus their sales primarily on annuity products. We had some good food, did some networking, and exchanged collective angst about the challenges of marketing “attractive” annuities. It was a mostly uneventful trip until the last day, when businesses began closing and flights began cancelling because of something called Novel Coronavirus, or COVID-19.

That was my last memory of things being “normal.”
Since that day I haven’t been able to color my hair, I am in desperate need of a pedicure, and my latest tattoo remains incomplete. I am unnaturally excited to have exchanges with the people in the drive-thru at my bank and I am suddenly quick to volunteer to run and get a loaf of bread (At last! A chance to escape!). This is definitely one for the history books.

But COVID-19 has affected the insurance business in a way that will go down in history as well. Insurance companies are suspending products, reducing rates, and de-risking their attractive product features. Premium bonuses have plummeted, rider payouts have dropped, and some have even reduced commissions. This virus has forced insurance companies to conduct business virtually, offering their salespeople the opportunity to meet with clients via computer or tablet. Applications are being submitted electronically, which is something insurance companies have talked about doing for two decades. I read recently that this virtual way of conducting business results in salespeople meeting with 30 percent more prospects daily, so it isn’t all bad.

On the regulatory front, the biggest news may be “Best Interest Regulation.” While the Department of Labor’s attempt at a fiduciary rule was thwarted, the Securities and Exchange Commission plans to roll-out “Reg BI” in June. For those salespeople saying, “It doesn’t concern me, as I’m not securities licensed,” individual states such as Massachusetts, Nevada, and New York have all issued their own best interest regs. My home state, Iowa, just became the most recent state to adopt the most recent iteration of the National Association of Insurance Commissioners’ Suitability in Annuity Transactions model regulation, which is built upon a best interest framework. In short, it’s coming.

In other regulatory news, many are cheering the passing of the SECURE Act. This legislation gives annuities within 401(k)s a green light by easing the fiduciary burdens associated with choosing plan providers selecting an annuity provider. (Note there were many groans too, as SECURE also marks the end to stretching an IRA over one’s life expectancy for most.) Those excited for the impending boon to annuity sales should temper their bliss; there is a ton of administration that insurance companies need to establish before this law will translate to a marked increase in annuity sales. Compounding the matter is the fact that insurers need to find a way to get in front of plan sponsors. Yet something everyone in the annuity business can appreciate is that this legislation has resulted in a slew of positive press for annuities.

And to close-out regulatory matters, indexed annuity product manufacturers are still hanging in the air, waiting to hear if they will be able to illustrate indexes that are less than ten years old. More on that later, as we discuss “hybrid indices.” However, note that this does not affect products, just the illustrations of select indices.

Product Development
Product development has been negatively impacted by COVID-19 in an inconceivable manner. When the market crashed, it had a chilling effect on fixed money instruments. Interest rates on “safe money” were already challenging, but today national averages are stunning:

  • Banks
    • Savings accounts: 0.10 percent.
    • Checking accounts: 0.08 percent.
    • Certificates of Deposit (CDs): 1.40 percent.
  • US Treasury
    • Series EE Bonds: 0.10 percent.
    • Series I Bonds: 0.20 percent with an inflation component of 1.01 percent (semiannually).
  • Insurance Companies
    • Fixed annuities: 1.77 percent.
    • Indexed annuities’ annual point-to-point caps: 3.37 percent.

Historically, we have witnessed how low interest rates negatively impact fixed annuity sales. This typically results in positive impact on sales of variable annuities. Yet, market volatility has conversely led to increased fixed annuity sales. This is why most variable annuity (VA) companies have both a VA offering and a fixed; this allows the assets to switch from one side of the house to the other during shifting market conditions.

That said, many insurance companies have developed indexed annuities over the past 25 years because, what happens when there are low interest rates market volatility? Rather than those assets shifting from one side of the house to the other, they fly out the door to companies with an indexed annuity offering.

Of interest is how we have seen a direct inverse relationship between how low CD rates are and how high indexed annuity sales are. Likewise, when market volatility is generally high, it results in a corresponding positive effect on indexed annuity sales. So, ultimately, all indicators suggest that indexed annuities will benefit from the current market environment.

To fully appreciate the challenges associated with pricing fixed annuities today, there are a few basic premises of pricing that you must understand. First, when it comes to annuity pricing, there are only 100 pennies in a dollar; it is all a matter of where you allocate your pennies. And there are three parties that must benefit from the annuity:

  1. The purchaser: Through a fair credited rate, or cap/participation rate/spread rate;
  2. The salesperson/distributor: Via a fair commission; and,
  3. The insurance company: Through their spread/profit.

I like to imagine a three-legged stool when it comes to this point. If a product has a relatively attractive commission, either the purchaser’s leg of the stool, or the insurance company’s leg of the stool must be shortened. Hot tip: The insurance company is always going to get their “pennies,” or the annuity won’t be available for sale.

When it comes to fixed annuities, it is helpful to understand another basic principle of annuity pricing. When a purchaser deposits $100,000 into a 10-year fixed annuity, the insurance company turns around and purchases 10-year bonds. Let’s assume the bonds are crediting the insurance company with 4.00 percent interest. The insurance company will credit less than this amount to the fixed annuity purchaser, and the difference is then used to pay expenses, distributor/agent commissions, and earn a profit/spread.

Given all of this, and to help put things into perspective, the 10-year treasury bond is not at 4.00 percent; it isn’t even at 1.00 percent. (Yahoo! Finance has some great historical graphs to show how this has plummeted). So, to say that insurance companies are trying to make lemonade out of lemons is a gross understatement.

To aid in your understanding of indexed annuity pricing, the basic principle of pricing fixed annuities, above, is slightly modified. Instead of placing 100 percent of the purchaser’s annuity payment into bonds, the insurance company only puts 97 percent of the amount into bonds. The remaining three percent is used to purchase options, which provide the indexed-linked interest. Here, I remind you that the 3.00 percent of the annuity purchaser’s premium is only able to purchase options that afford an average 3.37 percent annual point-to-point cap today. This leads me to our discussion of the biggest trend in the indexed annuity market.

Market Trends
We know that the excess interest credited to indexed annuities hinges on three things: The rates (caps/pars/spreads), the indexing method (annual point-to-point, monthly averaging, etc.), and the index. Let’s talk about that last item, specifically, as it has changed dramatically in the past eight years. When I started my market research firm 15 years ago, there were six indices upon which you could base indexed interest on these annuities: The DJIA, NASDAQ-100, Russell 2000, S&P 400, the S&P 500, and a now-defunct bond index.

Today, there are an astounding 116 different indices upon which to earn indexed interest on indexed annuities.

Enter the hybrid index. Hybrid indices are those that consist of one or more indices, and usually have a cash or bond component as well. Some hybrid indices are volatility controlled. Some are proprietary, so that they are marketed exclusively by a single company. Typically, the hybrid index is developed around the same date that the annuity is conceived (where, by contrast, the newest index prior to the emergence of these indices was more than 20 years old). These indices are almost universally controlled via a participation rate or spread, so as to give the ability to market that they offer “uncapped” potential to the annuity purchaser. They are usually illustrated favorably. Their “sexiness” is derived from the impression that they have an “unlimited potential for gains.”

By the way…not true.

Anyhow, why the boom in indices? In short, historically low rates. The indexed annuity product manufacturers seem to innovate best under pressure. Never underestimate how creative an insurance company can be until you put them in periods of pricing duress. The first time pricing indexed annuities became challenging, after their initial introduction, companies began using spreads instead of caps to limit indexed interest. The next period of unattractive rates gave birth to new crediting methods. So, instead of just offering point-to-point calculations, we began to see monthly and daily averaging methods. Now that financial institutions have embraced the products, “innovating” through indexing methods is no longer possible; these firms are strict on which indexing methods they allow. And so, new hybrid indices are how insurance companies are “innovating” to find a way to market something that would otherwise look relatively unpalatable.

And because everyone is focusing on the fantastic potential for gains, not many are talking about guaranteed income that cannot be outlived. Guaranteed Lifetime Withdrawal Benefit (GLWB) elections have fallen to an all-time low of 35.2 percent. Still, those companies telling the “income story” have started innovating in their own manner. Guaranteed roll ups have largely gone by the wayside, and have been replaced by GLWBs that use indexed gains for the Benefit Base value, offer stacking features, or boast “increasing income.” The Long Term Care (LTC)-kicker feature is still popular, offering purchasers twice the amount of income than typical if they qualify by needing assistance with two out of six Activities of Daily Living (ADLs).

The historical low rates have also resulted in restricted liquidity for all annuities. Gone are the days when 10 percent penalty-free withdrawals came standard! Most fixed and indexed annuities today offer five percent penalty-frees, and some even go so far as to offer seven percent (gasp!).

Coronavirus may be stinging us all, but it has had an interesting effect on sales. Specifically, indexed annuity sales are down 4.3 percent from last quarter and 7.4 percent from this time last year. Surprisingly, fixed annuity sales are up. One-year fixed rate annuity sales are up 0.5 percent over last quarter, but still down 27.1 percent from the same period a year prior. Similarly, multi-year guaranteed rate annuity sales are up 9.1 percent from last quarter, but down 32.5 percent from this time last year.

The good news in all of this is that sales will hit record levels once everything levels-out, the 10-year treasury rebounds, and everything returns to “normal.” Those familiar with annuities have a history of purchasing fixed products when they experience the losses of the market. And as people increasingly hear the word “annuity,” realizing that these products can address their top fear of running out of money in retirement, it sets the stage for a boon in your business. Until then, the annuity industry will do what it always does—adjust and keep providing the guaranteed lifetime income that Americans so desperately need.

Annuity Round Table: Selling To Boomer Clients

Q: This year the first baby boomers turn 65 and many are either retired or planning to retire within the next few years. What annuity product advice do you have for brokers when working with boomer clients?

John Douglass:
I would like to put a very positive spin on the question of the future of retirement planning and the huge influx of baby boomers now reaching what was to be the classic retirement age of 65. However, I do not think many retirees are hitching up their Airstream trailers and heading out to the open road to enjoy their golden years. That vision has long since disappeared; which means that the need for financial planning today is more crucial than ever with our current financial problems. I think you will find most retirement age couples willing to sit down and talk about ideas and how they can more successfully plan for the future.

Companies have enabled us to help these boomers with some creative products we did not have even a few years ago. The new income riders with guaranteed roll-ups that are available, along with the death benefit riders on indexed plans now entering the market, and critical illness plans all have a valuable need in planning for the future. We all know someone affected by a critical illness. Wealth transfer products, designed to pass on financial security to future generations, have provided brokers with attractive products with which to approach future retirees.

Plus, with life insurance companies no longer providing the incubating system to bring new agents into the field, the number of financial planners is greatly decreasing. Agents who have been in the field for many years have opted for retirement instead of dealing with new product training, anti-money laundering, and developing the technology skills to download materials, emails, etc., due to lack of phone support with many of the insurance companies today.

If agents are willing to meet the challenges of today’s marketplace in the form of technology skills, product training, and developing a savvy marketing sense, they are going to find success. The need for financial planners is growing and the companies are eager to support us with new, creative products. I think our industry has a very bright future meeting the concerns of the baby boomer generation, and who knows? With proper planning, maybe someday they actually can afford to retire. [JD]

Richard Hellerich: More than 10,000 boomers will reach age 65 every single day for the next 19 years, making this the largest annuity marketing segment in history. My advice to brokers is to understand that the sales process with boomers is quite different from the preceding silent, or greatest, generation.

Boomers are generally more educated, affluent and healthier. Many were anticipating a financially secure retirement, but are now dealing with aging parents or adult children dependent on their help, in addition to the current and long term impact of the economic downturn on their nest egg. These pressures, coupled with the desire to have a fulfilling and enjoyable retirement, have made them more receptive to the guarantees and benefits offered by traditional and fixed indexed annuity products.

Boomers prefer to have information presented in terms of categories and options using straightforward facts to help make purchasing decisions. Anticipate that whatever information you present to them at the point of sale will be researched and confirmed. You should also keep this in mind when developing content for your website or marketing materials. Using word-of-mouth communication and referrals from other trusted advisors (attorneys, CPAs, etc.) is also very effective in reaching them.

Pushing a particular carrier/product before the initial fact-finding interview will greatly reduce the chance of a sale. This does not apply to just the boomer market, and I hope this is obvious to all annuity professionals. Boomers are very skeptical of cookie-cutter solutions and expect an advisor to consider the unique aspects of their individual situations.

Here are fixed annuity product benefits appealing to boomers:

• Safety: The principal is protected, which prevents market losses.

• Longevity “insurance”: guaranteed lifetime income with flexibility.

• Estate planning: Once a beneficiary is named, the probate process is typically avoided.

• Liquidity: If needs change, annuities have several liquidity advantages.

• Living benefits: nursing home/long term care.

Fixed and fixed indexed annuities are back in vogue after years of being maligned in the consumer press. Financial editors and reporters have frequently assigned the traits of variable annuity products to fixed annuities, confusing consumers looking for vehicles to protect their retirement assets.

Boomers, still smarting from the market downturn of 2008, are very interested in protection from market downturns and guaranteed payouts for their lifetime. A broker who can help them create personalized and flexible income plans that also provide safety and tax benefits is likely to become the trusted advisor. [RH]

Tip Huffman: Being at the front end of the baby boom generations helps me to understand that brokers working with boomers need to be aware that boomers are fearful about maintaining and growing their retirement funds. They are fearful about having enough income to last through their retirement years. They are fearful about the potential costs of long term care. To be successful, agents need to be able to discuss these fears with their clients and prospects and have rock solid solutions to offer. [TH]

Ron Lane: Being a baby boomer myself, I marvel at the numerous insurance products aimed at my generation. And it’s no wonder; boomers are richer, better educated and more independent-minded than any other generation. They number 76 million strong—with $18 trillion of wealth. However, compared to their parents’ generation, boomers have alarmingly less than adequate retirement plans.

A few years ago we were asked to develop boomer products for carriers which required an exhaustive two-year study of baby boomers’ habits. We found they are not as financially savvy as we expected. Half of all affluent boomers had never consulted a professional advisor, but 75 percent were open to seeking help.

This brings us to some annuity product advice for brokers dealing with boomer clients. I suggest after your initial fact finding, you keep your product recommendations very straightforward. Don’t get caught up in explaining too many different products and their credit movements that influence gains after caps, spreads and participation rates. Heck, some index annuity products still confuse me, and I deal with them every day.

Remember, this age group is at the top of their income producing years. Their homes may be paid for, their children grown and, often, their spouse is employed too. Boomers want to continue their current lifestyles after retirement and will respond to a financial professional who can help them achieve that goal. [RL]

Sheryl Moore: Seven years ago, the boomers’ dilemma bothered me so much that I stayed awake at night trying to solve the problem: How can we get them to move their trillions of dollars that are accumulating into retirement income?

Boomers weren’t being told the retirement income story. Annuitization had existed for many, many years; so why weren’t agents talking about it? Only 2 percent of annuity purchasers were guaranteeing lifetime income via annuitization.

My research revealed that insurance agents didn’t talk about annuitization because (1) they would lose control of their clients’ assets, (2) they would be paid 4 percent street level compensation at best, and (3) clients would lose flexibility in obtaining funds from the assets. It was at this time that I developed the concept of guaranteed lifetime withdrawal benefits (GLWBs) on fixed and indexed annuities. GLWBs had been used on variable annuities as a way to add an element of safety to a “risk money” product. However, using the GLWB on a product that already had principal protection provided an alternative to annuitization on fixed and indexed annuities.

Today, 58 percent of indexed annuity sales have GLWB elected on the contract and 10 percent of these sales are actively taking income out under the GLWB! Retirement income problem solved!

My advice to brokers selling deferred annuities to boomers today is: Don’t forget the retirement income story! Providing a guaranteed income that boomers cannot outlive is paramount in this age of dwindling retirement account balances and ever-extending longevity. The GLWB helps you to tell this story. [SM]

Q: Is there an annuity product or marketing trend with significant potential that you would recommend to a producer?

Moore: I recommend GLWBs on both fixed and indexed annuities for those selling to boomer clients. Yet you need to know that GLWBs come in two varieties: for clients needing income today and for clients needing income tomorrow. Any GLWB that has a bonus that is credited to the benefit base of a GLWB, rather than to the account value of the annuity, performs best when the guaranteed lifetime income is turned on in the first few years of the contract. (These are those annuities advertising 15, 20 and 25 percent bonuses.)

Any GLWB that has a rollup which is credited every year the client defers income performs best when the guaranteed lifetime income is turned on after 7 to 10 years or even longer. (These are those annuities advertising “guaranteed [8 percent] growth every year that the annuitant defers income.”)

If you need help getting started with GLWBs, ask. If you don’t, you’ll be missing the boat with your boomer clients. [SM]

Lane: Because 80 percent of boomers plan to keep working past their normal retirement age, a prudent product would be a flexible premium deferred annuity. There is one we use with a first year premium bonus. The boomer clients can continue to make payments to such an account and when ready to receive a steady income stream, they also receive an additional annuitization bonus.

Young and old boomers have no difficulty in understanding this simple flexible premium, fixed interest annuity. Although these products may offer a lower fixed interest rate, when the bonus interest is added, these products beat the “stuffin’” out of certificates of deposit or money market accounts. There is an A+ rated carrier that has developed such a product and appropriately named it boomer annuity. [RL]

Huffman: We at TWH Agency believe very strongly in two specific product trends that address these fears:

1. Index-linked fixed annuities with guaranteed lifetime income riders. These plans offer rock solid guarantees that give boomers the ability to see their money grow tax-deferred without potential loss and can provide a guaranteed lifetime income benefit base that can produce outstanding lifetime monthly guaranteed income. In addition, many of the newer income riders also offer substantial guaranteed death benefits for those who want to pass assets on to heirs.

2. Linked-benefit life insurance and annuity-based long term care policies which serve multiple purposes. They provide substantial tax-free death benefits as well as long term care coverage. They solve the objection to the question “What happens if I never need to use my LTC coverage?” The answer is “Instead of ending up with a basket of receipts, either your heirs will receive a substantial tax-free death benefit or you can retrieve all or most of your premiums simply by cashing in the policy.”

Without a doubt, sales of these two product lines will be robust for the boomer market in the years ahead. [TH]

Hellerich: Currently, I believe the most significant trend in the fixed annuity market is income planning, Boomers are concerned about the continued viability of Social Security and the economy in general and are more  motivated than ever to create their own retirement paychecks. These concerns place fixed indexed annuities with lifetime income benefits in a favorable spotlight.

We have found great success in helping brokers and advisors create income and asset preservation plans tailored to the specific needs of clients and their families. If you listen to your prospects closely during the initial interview as they discuss their lifestyles and family goals, and if you have asked them to have the appropriate financial information available to discuss, your annuity marketing organization should be able to help you meet your client’s particular needs and apply appropriate product solutions to help you become the trusted advisor.

If you can help boomer clients sleep well at night knowing they have ensured their future, they will share your expertise with friends, relatives and associates. There is no better prospect referral than one given to you by an existing client.

Remember, more than 10,000 boomers will reach age 65 every single day for the next 19 years. Brokers who can assist boomer clients in creating guaranteed lifetime income by crafting a plan designed and built to meet unique needs and desires are going to be very busy. [RH]

Douglass: In regard to products, we have had success offering alternatives to low interest rates currently available on money markets and certificates of deposit for more conservative investors. With the ability to ladder these from one to ten years, some very competitive scenarios can be created.

Another product I particularly like is a single premium immediate annuity. The creative planning that can be done with an SPIA is tremendous—and now we have liquidity riders available, which gives us the ability to have return of premium with an SPIA!

People today are looking for flexibility and guarantees. The products today are delivering liquidity with guarantees. The guaranteed liquidity option is available in the life market on term, universal life, second-to-die and, now, on indexed annuities and SPIAs. The ability to rethink decisions and adjust in the future offers tremendous peace of mind and many selling opportunities as you make your clients aware of these flexible new products.

I suggest brokers expand their horizons and look at some of these niche product areas they have perhaps overlooked, particularly products available in the critical illness (extremely popular now, available as a stand-alone policy or rider), guaranteed issue life (for rated clients), wealth transfer (for qualified or non-qualified monies), traditional and indexed annuities—all excellent in covering various planning aspects for future retirees. [JD]

What You Need To KNow About The 10/10 Rule


We are receiving hundreds of calls since Florida enacted a variation of the 10/10 Rule effective January 1, 2011. For that reason, I thought that a little clarification about the rule was warranted.

Here are some things you need to know about the 10/10 Rule:
1. The 10/10 Rule is desk-drawer legislation that was initially adopted by some state insurance divisions.

2. The 10/10 Rule concerns the standard non-forfeiture values on all annuities: fixed, indexed and variable.

3. This rule limits surrender charges to 10 years and 10 percent in the first year of the annuity, for states using the rule.

4. Each state has its own twist on 10/10. Some states will permit a first-year surrender penalty of 15 percent if there is a guaranteed up-front bonus of 5 percent on the contract; some states add an age component to the rule; some states won’t allow MVAs on the contract.

5. The 10/10 Rule is not only a state approval issue, but also a distribution issue, as broker/dealers have been using 10/10 as the basis for their “approved lists” since Notice to Members 05-50 was issued by FINRA (then known as the NASD) in August of 2005.

6. Twelve states have used some variation of the 10/10 Rule to date: Alaska, Connecticut, Delaware, Florida, Illinois, Minnesota, New Jersey, Oregon, Pennsylvania, Texas, Utah and Washington.

7. One more state is currently considering implementation of the 10/10 Rule.

8. The most recent state to adopt a variation of 10/10  is Florida. Prior to that, Texas.

9. Florida’s passing of the “Safeguard Our Seniors Act” was unprecedented in terms of its 10/10 requirements, as it specified an exemption for the rule. The Florida version specifically notes that the rule does not apply to annuitants under age 65. However, for those aged 65 and over, the 10/10 Rule applies. There is an exemption, however, for “accredited investors.”

An accredited investor is defined as someone with (a) a net worth/joint net worth that exceeds $1 million at the time of purchase, (b) has had an individual income in excess of $200,000 in each of the two most recent years or joint income with spouse in excess of $300,000 for each of those years (and also has a reasonable expectation of reaching the same income level in the current year). Even though Florida allows this exemption, there are currently only two insurance companies that are permitting the exemption with their sales force.

You likely know that I do not endorse the restricting of surrender charges on annuities. Limiting surrender charges also limits commissions paid to the agent and interest credited to the purchaser. The longer period the insurer has to invest the purchaser’s premium payment, the greater gain they can pass on to the purchaser. As a young saver, I would be livid if my state insurance commissioner decided that a product with a surrender charge of more than 10 years was not suitable for me. I won’t be taking the money out any time soon: Bring on the double digit surrender charges!

Why should I have to keep rolling my annuity over every 10 years and paying another agent another commission each time? In essence, your grandma might have enough wits about her to purchase an $80,000 Cadillac, but she doesn’t have the choice of purchasing an insurance product that can guarantee her an income she cannot outlive.

Ridiculous. This is wrong. However, the insurance commissioners seem to think that the best way to limit exposure to bad agent behavior is to adopt rules such as 10/10.

Until I am elected President, it looks like 10/10 is here to stay. Keep making suitable sales!

Indexed Annuities And Rule 151A: Where Are We Now?


Oh what I wouldn’t give to not have to look at the numbers 151 and the letter A ever again!

Wouldn’t it be nice if the securities status of indexed annuities was firmly established today? Without question, the Securities and Exchange Commission (SEC) changed the world of life insurance forever when they first proposed that indexed annuities (IAs) be treated as securities some 18 months ago with their proposed Rule 151A. Recent litigation and legislative advancements in the efforts to secure the fixed insurance status of IAs have left many scratching their heads, wondering what will ever become of these invaluable retirement income products.

From a Regulatory Perspective

Although the rule was first proposed by the SEC on June 25, 2008, it was followed by a brief comment period. During this period, interested parties could give the SEC their “two cents” on whether or not IA products should be treated as securities. Precisely 4,448 comments were submitted on the issue, largely opposing the proposed rule. Unmoved, the Securities and Exchange Commission decided in a four-to-one vote to adopt rule 151A with slight modifications and regulate indexed annuities as securities on December 17, 2008. It was decided at that time that the rule would apply only to IAs that were issued after the rule’s effective date of January 12, 2011. Which leads us to our next perspective…

From a Litigation Perspective

A lawsuit was filed against the SEC, relative to their decision on Rule 151A, immediately following their issuance of the rule. American Equity Investment Life Insurance Company, et al. versus Securities and Exchange Commission was a shining beacon of hope for the millions of opponents of 151A. In the lawsuit, four insurance companies (American Equity Investment Life, Midland National Life, National Western Life, and Old Mutual Financial Life) and two marketing organizations (BHC Marketing and Tucker Advisory Group) were attempting to reverse the SEC’s ruling.

The judge in the case made a decision on July 21, 2009, declaring that the SEC had the authority to declare indexed annuities as securities, but that the SEC’s reasoning that the new rule would bring legal clarity to the status of equity index annuities was flawed. Furthermore, the court found that the SEC’s consideration of the effect of its rule on efficiency, competition and capital formation was arbitrary and capricious. At that time, many were left asking, “What now?”

The SEC had a couple of options:

1. They could decide that the rule was not a priority in light of their current problems.

2. They could complete the necessary analysis to provide the court with proof of the rule’s impact on competition, efficiency and capital formation.

The indexed annuity industry also had options:

1. Wait for January 12, 2011, when indexed annuities were to be regulated as securities.

2. Put all of their efforts into support of bills S1389 and HR2733 (more on that soon).

The petitioners gathered with their legal representation to decide how to proceed. Old Mutual ultimately asked the DC Court panel in the case to make the SEC give indexed annuity issuers more time to comply with Rule 151A.  This prompted the SEC to agree to provide a full two-year implementation period for federal regulation of IAs under Rule 151A (implementation would technically begin after a final rule is issued).

The SEC also has agreed through its court brief to open a Section 2(a) comment period on the SEC’s Section 2(b) analysis of the likely effects of Rule 151A. Section 2(b) of the federal Securities and Exchange Act of 1933 requires the SEC to include an analysis of possible effects on efficiency, capital formation and competition when it releases a draft of a proposed rule. Basically, the SEC just has to prove that Rule 151A would increase competition, capital formation and efficiency. And this leads us to our final perspective.

From a Legislative Perspective

United States Representative Gregory Meeks of New York’s sixth district introduced a bill (HR2733) to the House of Representatives in March 2009 known as the “Indexed Annuities and Insurance Products Classification Act of 2009.” The bill closes by declaring that “Rule 151A promulgated by the Securities and Exchange Commission and entitled ‘Indexed Annuities and Certain Other Insurance Contracts’ shall have no force or effect.”

Soon after the introduction of this bill, companion Senate Bill S1389 was introduced by Senator Ben Nelson of Nebraska. Today, there are 65 co-sponsors for the House bill and 12 co-sponsors for the Senate bill; and both bills are now sitting in the Committee on Banking, Housing, and Urban Affairs.

What Now?

HELP: Get some skin in the game. Don’t count on someone else to ensure that indexed annuities continue to be regulated as fixed insurance products!

Less than 20 percent of Congress is co-sponsoring this bill. If you want to continue being able to offer annuities that have downside guarantees and limited upside-indexed interest potential, get involved.

Even if you hate indexed annuities, you have a vested interest. If the SEC begins regulating these insurance products, what’s next? Term life?

Take five minutes and call, write, or drop in to your local legislator’s office.

For the most updated information on Rule 151A, visit and for economic impact studies of 151A’s effects on specific states, see