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New York Life Sparks Younger Americans to Focus on Retirement

By Reducing Minimum Premium for Deferred Income Annuity to $5,000, Purchase Age Drops 10 Years
Another Benefit for Younger Workers - New Policies Now Accept Annual IRA Contributions

NEW YORK, October 7, 2013 — New York Life opened a new market for its annuity product, called the Guaranteed Future Income Annuity1 (GFIA), when it recently dropped the minimum premium to $5,000 from $10,000. The average customer purchasing the GFIA with an initial premium of $5,000 is 48 years old, ten years younger than the overall average GFIA customer. The 48 and 58 year old cohorts defer their income start dates to an average age of 66 and 67 respectively, ages when many Americans elect to retire.

GFIA is a flexible way to pre-fund lifetime retirement income. It allows policyholders to set an income start date in the future, at which time they will begin receiving guaranteed income payments for the rest of their lives. Between the initial premium date and the income start date, they can continue to purchase more future income by making additional premium payments, and can defer or accelerate their income start date as their personal needs change.2

Opening a new IRA is the primary funding method for GFIA policies with an initial premium of $5,000 and 20 percent of these policies have pre-set a recurring annual contribution to continue to grow their future retirement income. By contrast, the primary funding method for all other GFIA policies, which have an average initial premium of $100,000, is via a rollover from another qualified plan, and only 3 percent of these policies have pre-set recurring contributions.

“When we launched our Guaranteed Future Income Annuity in 2011, our goal was to give Boomers the ability to create guaranteed lifetime income streams similar to the pensions of their parents’ era by rolling over their retirement savings. We are very pleased to see the lower initial premium is encouraging younger Baby Boomers and Gen Xers to turn their regular IRA contributions into a proven, guaranteed way to fund retirement,” said Matt Grove, senior managing director, New York Life. “Funding GFIA through an IRA contribution combines the tax benefits of an IRA with the pension-like guaranteed lifetime income of an income annuity.”

Here’s how it works: a 48 year old male purchases a GFIA with a $5,000 IRA contribution and continues to contribute $5,000 annually. When he retires at age 66, he will receive $9,622 annually for the rest of his life. Younger purchasers can generate even more guaranteed retirement income. If a 37 year old male purchases a GFIA with a $5,000 IRA contribution and continues to contribute $5,000 annually, when he retires at age 66, he will receive $20,667 annually for the rest of his life.3 The average GFIA customer is 58 years old and defers for 9 years; with a $100,000 contribution, he would receive $11,427 a year for the rest of his life starting at age 67.4

Younger workers are least likely to have a defined benefit (DB) plan. In fact, in 2010 only 9.6 percent of family heads under age 45 working in the private sector had a DB plan.5 For many individuals, contributing the maximum to their IRA each year is a prudent financial step because it can reduce taxable income while helping to prepare for financial needs in retirement. With this recent change to the GFIA, those who want to use their IRA to create a pension-like stream of guaranteed lifetime income can now do so.

“Today’s consumers expect a more abundant and ultimately more fulfilling retirement, and they expect it to last a long time. By taking the responsible step of pre-funding retirement, Americans can guarantee more income to thoroughly enjoy their retirement years, ” added Mr. Grove.

New York Life is the leader in sales of deferred income annuities, with 44 percent of the market for second quarter 2013, according to an industry source.6

New York Life Insurance Company, a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States7 and one of the largest life insurers in the world. New York Life has the highest possible financial strength ratings currently awarded to any life insurer from all four of the major credit rating agencies: A.M. Best (A++), Fitch (AAA), Moody’s Investors Service (Aaa), Standard & Poor’s (AA+).8 Headquartered in New York City, New York Life’s family of companies offers life insurance, retirement income, investments and long-term care insurance. New York Life Investments9 provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as retail mutual funds. Please visit New York Life’s website at www.newyorklife.com for more information.

1 New York Life Annuities are issued by New York Life Insurance and Annuity Corporation (NYLIAC), a wholly-owned subsidiary of New York Life. Available in jurisdictions where approved. Guarantees are subject to contract terms, exclusions and limitations, and the claims-paying ability of NYLIAC. This contract has no cash surrender value and no withdrawals are permitted prior to the income start date. Income payments are guaranteed at least as long as the annuitant is living provided the annuitant is alive on the designated income start date. Contracts in which a Life Only payout option is selected do not provide a death benefit either prior to or after the designated income start date. Clients should consult their own tax advisor regarding their specific situation.
2 The one time ability to move the income start date is not available for the Life Only option or in CT. The policy owner can accelerate the start of income payments to any date 13 months after the latest premium payment or defer income payments up to five additional years from the original income start date selected. Additional premium payments can be made up until two years before the income start date.
3 Life with Cash Refund option, as of September 11, 2013. Annuity payments consist of both interest and return of premium. Payout rates are subject to change and may vary depending on premium amount, age, gender, income option selected, and interest rates in effect at time premium is received.
4 ibid
5 Source: EBRI estimate based on the Survey of Consumer Finances, Federal Reserve Board, 2010.
6 Source: LIMRA International, U.S. Individual Annuity Sales Survey, Participants Report, Deferred Income Annuities, Second Quarter 2013 results.
7 Based on revenue as reported by “Fortune 500 ranked within Industries, Insurance: Life, Health (Mutual),” Fortune magazine, May 20, 2013. See http://money.cnn.com/magazines/fortune/fortune500/2013/faq/?iid=F500_sp_method%20 for methodology. 8 Individual independent rating agency commentary as of 8/1/13.
9 New York Life Investments is a service mark used by New York Life Investment Management Holdings LLC and its subsidiary, New York Life Investment Management LLC.

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