IN RECENT YEARS, variable annuities have become increasingly popular solutions for providing retirement income. During the 10 years through 2014, assets in variable annuities increased 60% to nearly $2 trillion.1 Combining a variable annuity with guaranteed lifetime withdrawal benefits (GLWBs) can make these solutions even more appealing, as they are one of the only investments you can buy that offer income for life, no matter how long you live. “This is why variable annuities with GLWB riders have become an important part of many clients’ retirement strategies,” says Elizabeth Forget, executive vice president, MetLife Retail Retirement & Wealth Solutions.
But when it comes to choosing the right variable annuity, married couples often must confront challenging questions, from how much future income they’ll need in retirement to whether those benefits should be shared by a spouse. “While these popular retirement products can help secure guaranteed2 lifetime income regardless of market conditions, clients may have to trade the flexibility they want in order to generate the retirement income they need,” says Forget. “This is especially true for married couples, who often must make difficult decisions today that may limit their ability to adapt to changing needs.”
Adapting to Change
How can clients take a more flexible approach to annuities? One solution is a MetLife variable annuity with the optional FlexChoice3 rider, which is designed to combine lifetime retirement income4 with the opportunity to benefit from market growth, and allow considerable flexibility around timing of withdrawals and other factors. Best of all for married couples, the FlexChoice rider allows additional flexibility, such as not requiring clients to choose whether to cover their spouse at the time the annuity is issued, and charging no additional fees to cover their spouse.
“After all, no one can predict what their life will look like 20 years in the future,” says Forget. “FlexChoice was designed to remove the tough decisions married couples often face when planning for retirement income.”
Here’s how it works:
The freedom to choose. With a MetLife variable annuity with the FlexChoice rider, there is no need to choose between single or joint lifetime income options when the annuity is issued. That decision is made in the future if the account value decreases to zero due to market conditions or an allowable withdrawal.5 That means your married clients can be covered—no matter how their lives unfold.6
Initial withdrawal rates are the same for married and single clients.7 With FlexChoice, clients will receive the same initial withdrawal rate whether they are single or married. That rate is determined by the client’s first withdrawal after age 59 1/2, and will remain locked in while the account value is greater than zero.
In addition, if one spouse passes away, the surviving spouse can continue receiving income at the established withdrawal rate.8 If the account value reduces to zero at a later date, the surviving spouse can elect to receive single lifetime income or a lump-sum payment.
Income is based on the age of the older owner. Nearly 9 in 10 married couples are different ages, and the average age difference between spouses is 2.3 years.9 That gap may seem small, but it’s big for couples for whom the younger spouse must reach a certain age to withdraw a certain percentage of income. FlexChoice addresses this problem by basing the initial withdrawal rate on the age of the older owner at the time of his or her first withdrawal after age 59 1/2 — regardless of how clients choose to withdraw their income. “This allows clients to potentially get more income sooner,” says Forget.
No additional charge to cover the spouse. When it comes to shopping for a variable annuity with a GLWB rider, married couples often have to look at two price tags: one fee is for a single-life version, and another fee is charged for a joint-life version of a GLWB rider. FlexChoice doesn’t charge clients more just because they happen to be married - regardless of whether they choose single life or joint life if the account value is reduced to zero.
“Ultimately”, says Forget, “every couple has different needs and goals for retirement. That’s why clients need flexible products that allow them to pursue their vision of retirement on their own terms”. Clients should speak with their financial advisors to determine how best to build a protected income strategy through a product such as a variable annuity with the FlexChoice rider. “People have expectations and plans for their retirement, but life can unfold in unexpected ways,” says Forget. “FlexChoice adapts to these changing needs and allows clients to retire on their own terms.”
1 Insurance Information Institute, "Deferred Annuity Assets, 2005-2014," http://www.iii.org/fact-statistic/annuities.
2 Guarantees are subject to the claims-paying ability and financial strength of the issuing insurance company.
3 FlexChoice is referred to as the Guaranteed Lifetime Withdrawal Benefit in the prospectus. Available for an additional annual fee of 1.20% of the Benefit Base. Upon Automatic Step-Up, the annual charge may increase, up to a maximum of 2.00%
4 We use the terms “income” and “lifetime income” to refer to any allowable withdrawal(s) under the FlexChoice rider, as well as any lifetime income payments your clients would receive under the rider if their account value reduces to zero.
5 If the contract’s account value is reduced to zero due to a withdrawal before age 591/2, or due to an excess withdrawal, your clients will not be eligible for lifetime income, no further benefit will be payable under the FlexChoice rider, and the rider will terminate. See prospectus for details.
6 The Joint Lifetime Guarantee Rate is only available for spouses. The spouse cannot be more than 10 years younger than the older owner (4 years younger in the state of New York) as determined by the birthdays of the two individuals. If a contract is jointly owned, the Joint Lifetime Guarantee Rate is only available for the spouse of the older owner.
7 The initial withdrawal rate is based on your client’s age—or the age of the older owner if jointly owned—at the time of their 1st withdrawal after age 59 1/2. Your clients can continue to withdraw income at their initial withdrawal rate until the account value reduces to zero. If the account value reduces to zero, they can elect to receive income for 1 or 2 lives based on the applicable Lifetime Guarantee Rate. If a contract is jointly owned, the Joint Lifetime Guarantee Rate is only available for the spouse of the older owner.
8 This option is only available if your spouse is the sole primary beneficiary and not more than 10 years younger than you (4 years in the state of NY)
9 U.S. Census Bureau, 2013.
It is possible to lose money in a variable annuity even when an optional protection benefit is elected. The prospectus for a MetLife variable annuity issued by a MetLife insurance company is available from MetLife. The contract prospectus contains information about the contract’s features, risks, charges and expenses. Clients should read the prospectus and consider this information carefully before investing. Availability and features may vary by state. MetLife variable annuities are long-term investments designed for retirement purposes and have limitations, exclusions, charges, termination provisions and terms for keeping them in force. The account value is subject to market fluctuations and investment risk so that, when withdrawn, it may be worth more or less than its original value. Variable annuities, other than Preference Premier®, are issued by MetLife Insurance Company USA, Charlotte, NC 28277 on Policy Form 8010 (11/00). The Preference Premier variable annuity is issued by Metropolitan Life Insurance Company; New York, NY 10166 on Policy Form PPS (07/01) and is offered through MetLife Securities, Inc. (member FINRA/SIPC). All variable products are distributed by MetLife Investors Distribution Company (member FINRA). All are MetLife companies. © 2015 MetLife, Inc.
Variable annuities, other than Preference Premier®, are issued by MetLife Insurance Company USA on Policy Form 8010 (11/00) and in New York, only by First MetLife Investors Insurance Company on Policy Form 6010 (02/02). The Preference Premier variable annuity is issued by Metropolitan Life Insurance Company on Policy Form PPS (07/01). (Collectively and singularly “MetLife”.) All variable products are distributed by MetLife Investors Distribution Company (member FINRA). All are MetLife companies.