Annuities Are for Savers and Spenders
April 24, 2019 by John Manganaro
Since joining Principal in August 2018, Sri Reddy, senior vice president of retirement and income solutions, has continued his long-running efforts to clear up common misconceptions about annuities and guaranteed income products.
On this point, the firm recently commissioned and published a white paper by Michael Finke and Wade Pfau. The research looked at how retirees can use guaranteed income annuities to not only improve financial outcomes, but also increase confidence and reduce stress in retirement.
The white paper data shows retirees who had guaranteed income through an annuity were more likely to feel confident and accept more market volatility with their other assets. Reddy points to supplemental simulations detailed in the paper, which suggest adding an income annuity to a retirement portfolio allows a retiree to get the same or higher income with lower risk of outliving savings than an investments-only approach. The paper emphasizes that using both annuities and investments can enhance the value of assets for heirs over the long term.
“On an emotional level, retirees are more confident when there’s certainty to their monthly income,” Reddy says. “The certainty an income annuity provides increases confidence and reduces stress in retirement. The head and the heart come together here to show that annuities really do help people have enough, save enough and protect enough for their future.”