An interview with Corrine Anderson, VP of Retirement Product Strategy
In an attempt to curb inflation, the Federal Reserve has increased interest rates from near zero at the beginning of 2022, to a range of 4.75% to 5% in 2023. Fears that rising rates will cause an economic slowdown and increased market volatility have investors looking for opportunities to safely add income to their portfolios. We spoke to Corinne Anderson, vice president of retirement product strategy at Protective Life about how annuities can provide a steady stream of income for retirees, the opportunities rising interest rates present, and innovations that help clients access guaranteed income while providing flexible withdrawals.
What kind of impact are advisors seeing from rising inflation and interest rates?
People are mainly feeling the decreasing value of the dollar. When you go to the grocery store or the gas station, your dollar is just not stretching as far with inflation. But there’s a silver lining when it comes to retirement savings. Over the past year and a half, we've seen a lot of annuity companies and savings companies increase rates, offering better savings rates for clients who are trying to save for retirement.
We’ve also seen them increasing lifetime guarantees on products like guaranteed lifetime withdrawal benefits on annuities. So for advisors who are looking to help their clients build wealth, it’s a great time to start thinking about retirement planning conversations that include these products.
Given the current economic climate and rising rates, is it a good time to buy annuities?
Absolutely. Over the last couple of years, we’ve seen insurance companies increasing payouts and making it so that clients looking for guaranteed income are able to maximize their value by locking in those guarantees.
What questions should advisors be considering when they're considering the wide variety of variable annuities on the market?
There's been a lot of innovation recently in the annuities space. So, I think it's a really good time for advisors to take a second look at what’s out there. Variable annuities allow clients to participate in market while offering guaranteed withdrawal rates from lifetime income, and one of the big questions advisors should consider is what rates their clients can lock in.
At the same time it’s important for advisors to think holistically and build flexibility into their clients’ plans. Recent studies have shown that about half of retirees end up retiring earlier than they thought. So while it's really helpful to make plans that look at guaranteed income, keep flexibility in mind. What happens if a client ends up retiring a couple of years earlier or a couple of years later?
What kind of innovations in the annuity space have you been pursuing at Protective that address problems like these?
Our newest variable annuity product, Protective Aspirations Variable Annuity, has a few innovations that strike a balance between guarantees and flexibility. We have two guaranteed lifetime income benefits within the product, one we call SecurePay Protecto benefit focusing on maximizing guarantee. It allows higher equity investment earlier when you're trying to build growth, and then a little bit less equity exposure — a kind of tightening down on your risk — when you're in that withdrawal phase and trying to live off of your income. Our other GLWB, SecurePay Investor benefit, is designed as a low-cost income solution so clients can focus on keeping more of their market growth.
We also focused on some of the pitfalls that people sometimes run into with guaranteed annuities and lifetime withdrawal benefits. A lot of clients we've seen end up taking less than their full allowable withdrawal amount for the year. But you don't really get any credit for that with most annuities in the market right now. Our feature, Secure Reserve, allows you to keep track of that unused amount and carry it forward up to three times your annual withdrawal amount. In later years, if you want to take a larger withdrawal, you can do so with the amount you've saved up without worrying about decreasing your lifetime income.
How do these product innovations tie in to events in the broader economy right now?
When designing these products, one of the things we really focused on was that people are going to have to change their plans; you can't predict exactly when you're going to be able to retire given everything that's going on in the market.
So instead of having withdrawal rate cliffs where you have to wait until age 65 or age 70, our withdrawal rate steps up at each age of deferral. So no matter when you decide to retire, you're still making the most of that deferral time.
Our products also focus on making sure clients can still participate in the equity market. When you have a secondary safety net in the form of an income guarantee, you can focus a bit more on growing money invested in the market.
What kind of guidance do you give advisors about the conversations that they should be having with their clients?
Advisors should think about their clients’ whole portfolios and what guaranteed income can do for them in terms of allowing them to play with their asset allocation a little bit differently. If you’re considering adding annuities to a client portfolio, it's really important for advisors to think about the financial strength of the company they choose. That company is making guarantees for 20, 30 years, sometimes longer, and knowing that you're working with a company that's going to be there — that's going to be able to live up to those promises years and decades down the line — is critically important.
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Protective refers to Protective Life Insurance Company (PLICO), Nashville, TN. Protective® is a registered trademark of Protective Life Insurance Company. The Protective trademarks, logos and service marks are property of PLICO and are protected by copyright, trademark, and/or other proprietary rights and laws.
Variable annuities issued by Protective Life Insurance Company. Securities offered by Investment Distributors, Inc. (IDI). IDI, located in Birmingham, AL, is the principal underwriter for registered insurance products issued by PLICO, its affiliate. Product guarantees are backed by the financial strength and claims-paying ability of PLICO.
Protective Aspirations variable annuity is a flexible premium deferred variable and fixed annuity contract issued by PLICO in all states except New York under policy form series VDA-P-2006. SecurePay Protector benefits issued under rider form number VDA-P-6061. SecurePay Investor benefits issued under rider form number VDA-P-6063. SecurePay NH issued under endorsement form series IPV-2159. Policy form numbers, product availability and product features may vary by state.
Variable annuities are long-term investments intended for retirement planning and involve market risk and the possible loss of principal. Investments in variable annuities are subject to fees and changes from the insurance company and the investment managers.
Investors should carefully consider the investment objectives, risks, charges and expenses of a variable annuity, any optional protected lifetime income benefit, and the underlying investment options before investing. This and other information is contained in the prospectuses for a variable annuity and its underlying investment options. Investors should read the prospectuses carefully before investing. Prospectuses may be obtained by contacting PLICO at 800-456-6330.
Protective and its representatives do not offer investment, legal or tax advice, it is important that clients consult their own investment, legal and tax professionals about their specific financial situations.
Insurance and Annuities are: Not a Deposit | Not Insured by any Federal Government Agency | Have no Bank or Credit Union Guarantee | Not FDIC/NCUA Insured | May Lose Value