Low interest rates continue to make retirement income planning challenging, which requires financial planners to be more innovative, according to Bryan Pinsky, senior vice president of individual retirement pricing and product development at AIG Life & Retirement.
Current fixed-income market conditions make folding annuities into a retirement plan more advantageous than in the past, Pinsky said in a recent interview.
“The lower growth rate of fixed income has made it more likely that retirees could outlive their assets,” Pinsky said. “The main impact of these conditions is on retirement planning.”
Advisors can put 10% to 30% of a client’s assets in annuity products to increase the probability of success in retirement, said the representative of AIG, which sells annuities.
Advisors have at their disposal income planning tools that can show clients how much income they need, how much they have coming in from various sources and whether there is a gap between the two. The problem can then be solved to fill that gap, he said.
A wide variety of annuity products have been developed in the last decade, including some with lifetime income guarantees and others with various tax advantages, Pinsky said. Mutual funds cannot provide the same guarantees or advantages, he said.
“If a client is looking for a guaranteed income and protection from a down market, annuity products are the solution,” he added. “What the advisor needs to understand are the income needs of his or her client. These products definitely are becoming more important as the low-interest-rate environment will probably continue.”
Variable annuities have lost some favor in recent years, but “a lot of innovation has taken place in fixed and indexed annuities,” Pinsky said.