|Donald Jay Korn|
In 2012, deferred income annuities (DIAs) were offered by only five or six insurance companies, according to
One reason for DIAs’ current popularity is the growing scarcity of traditional pensions, which have long provided retirees with a steady income stream. “Our data show that over half the households with retirees 75 or older have pensions,” says Iqbal, “while many fewer households in the 46-54 age range expect to receive pensions.”
<person>Ross Goldstein, managing director at
DIAs do have their drawbacks. Payouts generally are not adjusted for inflation, and buyers are reliant upon an insurer’s fiscal strength to ensure payment.
WHEN IT PAYS TO WAIT
Iqbal reports that DIA purchasers typically are between the ages of 58 to 63, and tend to wait four to nine years to begin their payments. The longer the waiting period, the greater the promised periodic cash flow. “For example,” says Goldstein, “assuming a
About 90% of his company’s DIAs are purchased with a premium refund option, Goldstein notes. That is, beneficiaries will get a payment if the purchaser of the annuity dies before receiving the amount invested. “Currently,” he adds, “a male, age 58, deferring for nine years with a one-time premium payment of
Other, relatively recent, innovations: Purchasers may be able to pay flexible premiums, rather than a single initial lump sum, says Iqbal. “There is also more flexibility as to when payments will start, and possibly some provision for accelerating payments,” he says.
“The guaranteed payouts cannot be replicated on one’s own or with any other product,” Goldstein says. “If income is your goal, the DIA is the most efficient way to generate income in retirement.”
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