As pension plans fade, today’s investors may want to look to annuities to bridge the retirement gap, one expert said.
“My father’s generation, a huge amount of people had a pension payout,” said John Schlifske, CEO at Northwestern Mutual, a financial firm. “Now of course, unless you’re a public sector worker, it’s almost impossible to find a pension plan that provides guaranteed income in retirement.”
At a time when the future of Social Security is uncertain, with some experts predicting reduced payouts after 2031, Schlifske said people will flock to annuities to bridge that gap.
‘Annuities have a lot of value in today’s world’
When it comes to having a guaranteed income for life, annuities are an ideal choice, Schlifske said.
“If you work your whole life, build up a nest egg, and are set to retire without any guaranteed income at all except maybe Social Security, you put a lot of your retirement at risk,” he said.
Two-thirds of retirement investment advisors would recommend annuities to clients, according to research released by RetireOne, a platform for fee-based insurance solutions.
“Annuities that provide this guaranteed income are a great product, especially in retirement, and I think you’ll see more and more people do it,” he said, “because they have no other means to lock up their savings into some form of lifetime income.”
Life Insurance is a viable option in the long-term
Despite low rates, Schlifske also mentioned life insurance as a viable product for retirees.
“I think mutuals are a better way to protect yourself, especially in buying life insurance,” Schlifske said. “We’re not splitting the returns on that asset base but instead giving it all to policy owners.”
Just over half of American adults reported having a life insurance policy, a drop from 63% ten years ago.
“I think when you look at the return on the capital you’ll see that our policy owners get all the value we create,” Schlifske said.