Your Retirement Can Be Everything You Expect
At New York Life, we believe that your retirement years should be all that you hope for. Whether it includes travel, hobbies, volunteering, or spending time with family and friends, you’ll need income to support the retirement lifestyle you’ve always imagined. That’s why we offer Guaranteed Lifetime Income products—to help you enjoy peace of mind in your retirement, knowing that your retirement income will last as long as you live. That’s the promise we make to you: retirement income that lasts. It’s a promise that’s as good as gold.
The New Face of Retirement
In the past, retirees typically relied on their employers to provide pensions during retirement. Along with Social Security and personal savings, employer-sponsored defined benefit plans helped ensure retirees a decent quality of life during a retirement that was expected to last between 10 and 20 years.
How different the retirement landscape looks today.
If you are like many Americans, you may not have access to a traditional pension plan. Even if you are among the lucky few vested in a traditional company pension, there’s always a chance your pension benefits will be reduced. And if you have been a stay-at-home spouse or were self-employed, you may not have access to a company retirement plan of any kind.
What about Social Security? We are all aware of the uncertainty surrounding the future of Social Security. Within less than two decades, there could be more retirees receiving payments than there are workers contributing to the system. In fact, annual outlays for Social Security are projected to exceed revenues beginning in 2019.1 And then there’s the reality of inflation: which averaged 3.5% since 19162 along with the always-rising costs of health care.
Will You Have the Income You Need To Enjoy Your Retirement Fully?
Contributing to the evolving face of retirement is the fact that Americans are living longer, healthier lives. Thanks to medical advances and healthier lifestyles, life expectancy in the United States has risen by 30 years over the last century3—and continues to rise. In fact, a healthy 65-year old male today has a 50% chance of reaching age 84, and a 25% chance of reaching age 91. A healthy 65-year old female has a 50% chance of reaching age 87, and a 25% chance of living to at least age 93.4
Living longer and healthier lives means that many people today will be spending a lot of time in retirement, perhaps even 20 or 30 years. And rather than retirement being a time to “slow down,” today’s retirees are finding that it is a gloriously active “third act” of life, a time to harvest the fruits of their life’s work and live the dreams they’ve been building toward during their working years.
Unfortunately, just as people are more actively enjoying their retirement, there are fewer sources of guaranteed income to support those retirement lifestyles. With fewer and fewer guarantees, you want to know that your income sources will last as long as you do.
Our Lifetime Income Annuity provides that assurance. A stream of income for as long as you live—no matter how long that is—helps ensure that the fruits of your financial efforts will continue to sustain you throughout your retirement.
A Better Approach With a 100% Guarantee
Some people prefer to manage their own savings, deciding in effect to “pay themselves” through their retirement by withdrawing their money as they need it. But even with a diversified portfolio of stocks, bonds, and CDs, there are risks—including market volatility and the chance that you may outlive your money. Keep in mind that the amount of income you’ll need to maintain your lifestyle during retirement may be as much as 90% of the income you earned while working.5
To better manage these risks, you may want to consider purchasing a Lifetime Income Annuity from New York Life Insurance Company or its wholly owned subsidiary, New York Life Insurance and Annuity Corporation. Our Lifetime Income Annuity provides a 100% guarantee6 that your retirement income will last as long as you live, no matter how long that is and no matter how the financial markets perform.
In addition to the 100% guarantee, the Lifetime Income Annuity typically offers higher payout rates than would be possible with periodic withdrawals. For example, if you are a 65-year old male and are planning on spending down your nest egg, you could withdraw approximately 4% a year if you wanted your portfolio to last around 30 years—and there’s only about a 90% probability that your nest egg will last that long.7 While payout rates vary based on age, gender, interest rates, and other factors, the Lifetime Income Annuity typically offers a 5% to 6% payout rate based on payments that include an annual 3% inflation adjustment—a payout rate that is 25%–50% higher than the 4% you would receive spending down your nest egg.8
How a Lifetime Income Annuity Works
Consider the following example of how a Lifetime Income Annuity might work: If you’re a 65-year old male and you purchase a Lifetime Income Annuity with a premium of $100,000, you might receive payments of $697 per month, or $8,364 per year, for the rest of your life. And because this non-qualified annuity was purchased with after-tax dollars, only $3,372 of that annual income would be taxable. The remaining $4,992 would be treated as a return of your principal, which you would receive tax-free for approximately the next 20 years.9 Thereafter, the income payments are fully taxable.
How Your Income Payments Are Determined
For all Lifetime Income Annuities, the factors that determine the amount of payments you will receive include:
- The amount of your premium and the interest rate environment when you purchase your policy;
- The number of lives the policy covers (either one or two);
- Your age and gender (and those of the other person, for Joint Life policies);
- Any guaranteed minimum payment, inflation protection, change in income schedule, or legacy options you select;
- The frequency with which you choose to receive your income payments (monthly, quarterly, semi-annually, or annually); and
- The date on which your payments are scheduled to begin.10
How Much Will You Need? Consider Both the Essentials and the “Extras”
Your retirement income will most likely come from Social Security benefits, your personal savings—and if you’re lucky—a pension or other employer-sponsored plan. To determine how much money you’ll need in retirement, consider the following:
- Day-to-day living expenses;
- Medical expenses, which may increase over time;
- Inflation, which can make a significant difference in future buying power;
- Personal hobbies and interests;
- Charitable contributions to support worthy causes; and
- Family gifting (e.g., to a grandchild).
Tailor Your Lifetime Income Annuity To Meet Your Objectives
In addition to income for life, the Lifetime Income Annuity offers a combination of cutting-edge features11 that can address your retirement income concerns. You can choose from the following:12
Single or Joint Life Only Policy: A Single Life Only policy provides payments for the remainder of your life, regardless of how long you live. This option provides the highest income for any given premium, but payments cease upon death.
A Joint Life Only policy pays an income for as long as you or one other person—usually your spouse—continues to live. If one of you dies, payments will continue to the survivor for the rest of his or her lifetime. Of course, all else being equal, a given premium amount will provide a lower income if it is designed to last throughout the lives of two individuals, rather than one life alone. With this option, payments cease after both of you have died.
Single or Joint Life with Period Certain: Pays a lifetime income that lasts for either one or two lifetimes and guarantees a minimum number of years payments, even if you (or both of you, if you’ve elected a Joint Life with Period Certain policy) were to die before the end of that period of time. You select a guaranteed payment period of 5 to 30 years when you purchase your policy.If you (or both of you, if you’ve elected a Joint Life with Period Certain policy) die before the guaranteed minimum payment period has elapsed, the remaining guaranteed payments will be made to your beneficiaries.13
Single or Joint Life with Cash Refund: Pays a lifetime income that lasts for either one or two lifetimes and guarantees that you and your beneficiaries will receive income benefits totaling at least the amount you paid for your policy.
If you (or both of you, if you’ve elected a Joint Life with Cash Refund policy) die prematurely, your beneficiaries are guaranteed to receive, in a lump sum, the difference between the premium you paid for your policy and the sum of the payments you received from the policy.14
Single or Joint Life with Percent of Premium Death Benefit:15 Pays a lifetime income for either one or two lives, and when you (or both of you, if you’ve elected a Joint Life with Percent of Premium Death Benefit policy) die, a percentage of your premium payment—either 25% or 50%, which you select when you purchase your policy—is paid to your beneficiaries in a single sum. This alternative pays a lower income for the same premium than one that does not provide a guaranteed death benefit, but it ensures a legacy for your heirs. Furthermore, the amount your heirs receive will generally not be subject to taxes.16
Reduction of Benefits for Joint Life Policies:
Most of our Joint Life policies17 offer you the flexibility to choose whether the survivor will continue to receive the same income that was paid while both of you were alive or only a portion (40% to 99%) of that amount. You might decide, for example, that if one of you were to die, the survivor would need only 80% of the income that both of you previously required. Choosing this lower percentage may best meet your needs because a Joint Life policy that pays a smaller income to the survivor will provide a higher income while both of you are alive.
Protect Yourself from the Effects of Inflation
You can also choose our Annual Increase Option.18 If you elect this option, you choose to have your initial income start lower, but your payments will increase each year by 1% to 5%, depending on the percentage you choose. By structuring your payments this way, you may help neutralize the impact of inflation as your living expenses increase over time.
Changing Needs™Option: Adjust Your Income Payments To Meet Your Needs
The Changing Needs Option19 can be a particularly effective tool in a retirement income strategy because it provides you with the opportunity to decide, at issue, to have your income payments adjusted at a particular point in the future. This may be attractive if you foresee your needs changing over time.
Unlike the Annual Increase Option, which allows you to structure your income payments to increase incrementally to help offset inflation, the Changing Needs Option provides a one-time opportunity to either increase or reduce your payments going forward. For instance, you may choose to have a larger payment during your early retirement years, and then have the payment amount decrease at a given point in the future (e.g., you may decide to have the decrease coincide with when you start receiving Social Security payments). This strategy may allow you to delay receiving Social Security benefits, so that you can obtain higher Social Security payments at a later date. Or, if you anticipate a current income source expiring down the line (e.g., income from a current part-time job), you can plan to have your payments increase as a way to help replace that income in the future.
The Changing Needs Option allows you to choose, at issue, to either increase your income payments in an amount up to five times your initial income payments, or reduce them to as low as one-half your initial payments. This increase or reduction may begin on, or any time after, the third anniversary of the income start date.
Potentially Benefit from Higher Interest Rates
Once you have “locked-in” guaranteed lifetime income with a Lifetime Income Annuity, the Income Enhancement Option, 20 if purchased at issue, provides you with an opportunity to benefit, if interest rates rise, even though your annuity was purchased in a lower interest rate environment. The Income Enhancement Option works in conjunction with a benchmark interest rate index to provide a potential one-time increase in income payments going forward after the policy’s fifth anniversary. If the benchmark index is at least 2% higher on the policy’s fifth anniversary, annuity income will increase automatically to reflect the higher interest rate.21 The increase amount is fixed when the policy is issued, so you will know exactly when and by how much the payments may potentially increase.22
For example, if you purchase a Lifetime Income Annuity with the Income Enhancement Option when the applicable benchmark index is 4.5%, your payments would increase automatically if the benchmark index were 6.5% or higher on the policy’s fifth anniversary. As explained above, the increase amount is fixed when the policy is issued and is disclosed in the policy, so you will know the higher payment amount that you could begin receiving after the policy’s fifth anniversary. If, on the fifth policy anniversary, the benchmark index were not at least 6.5%, you would continue receiving the original, guaranteed income payment amount.
Withdrawal Features To Help You Manage Unforeseen Circumstances
The Lifetime Income Annuity provides access to money beyond the scheduled income payments in the event you need additional funds due to unexpected circumstances. Each policy includes two withdrawal features that provide you access to cash in an emergency after you are at least age 59½—a Payment Acceleration feature and Cash Withdrawal feature:
Payment Accelerationenables you to receive your next scheduled monthly payment, along with the five subsequent payments—for a total of six months of income payments paid to you all at once. When you exercise this option, your income payments will not be paid for the next five months. You may use the Payment Acceleration feature twice during the life of your policy. The Payment Acceleration feature is available only on non-qualified policies that make monthly payments.
Cash Withdrawal provides a one-time opportunity to receive the discounted value of future payments. 23 Depending on the policy you purchase, you will have access to cash through one of two Cash Withdrawal features:24
“Up to 100%” Cash Withdrawal allows you to withdraw up to 100% of the discounted value of remaining guaranteed payments at any time within the guaranteed period. Once this option is exercised, future income payments through the end of the guaranteed period will be reduced by the withdrawal percentage you elected. If the annuitant is alive at the end of the guaranteed period, full annuity payments will then resume for the life of the policy.25 This feature is available only on non-qualified policies with a Life with Cash Refund26 or Life with Period Certain payout option.
30% Cash Withdrawal allows you to withdraw 30% of the discounted value of the remaining payments expected to be paid to you based on your life expectancy when you purchased your policy. You may exercise this option on the 5th, 10th or 15th anniversary of your first income payment, or upon proof of a significant, non-medical financial loss 27 as specified in the policy. Once this option is exercised, future income payments will be reduced by 30% for the life of the policy. This feature is available on qualified policies, and non-qualified policies with a Life Only or Life With Percent of Premium Death Benefit payout option.
Withdrawals made using the Payment Acceleration feature and the Cash Withdrawal feature will be reported to the Internal Revenue Service (IRS) as fully taxable.29 In addition, penalty taxes may apply in certain circumstances as a result of exercising a withdrawal feature under an immediate annuity.30 Please consult with your professional tax advisor.
(Not all options are available on all contracts, in all jurisdictions, or to annuitants of all ages. Ask your insurance professional for details.)
Significant Tax Advantages
An income annuity can also provide you with tax advantages, the nature of which depends on the type of money you use to purchase your policy:
Non-qualified annuities are purchased using after-tax dollars you may have accumulated in other savings vehicles. Each annuity income payment consists of a taxable income portion, and a return of premium portion, which is not taxable. The division between taxable and “tax-free” portions of the payment is determined by IRS rules based on several factors, including your life expectancy, the premium you paid for your policy (or other “cost basis”), and any guarantees chosen. Once the “tax-free” payments you receive equal your policy’s “cost basis,” all future payments you receive are 100% taxable as ordinary income.
Qualified annuities are purchased using “pretax” dollars you may have accumulated in an Individual Retirement Account (IRA), 401(k), Keogh or other employer-sponsored retirement plan. Qualified annuity payments generally are fully taxable as ordinary income in the year they are received. By rolling funds from a qualified plan into a Lifetime Income Annuity rather than taking a lump-sum distribution, however, you will spread your tax liability over many years, which may reduce your total tax liability.
An additional benefit gained from purchasing a Lifetime Income Annuity with qualified money is that the income payments you receive may satisfy the IRS’ requirement that you withdraw Required Minimum Distributions (RMDs) from accounts set up under certain qualified plans. Your RMDs generally must be withdrawn each year after you reach age 70½, and severe penalties are imposed if you fail to withdraw the full RMD amount from your qualified retirement plans and IRAs.
A Lifetime Income Annuity may help ensure that you satisfy IRS requirements. If you choose a guaranteed payment period and want the payments to satisfy your RMD requirements, the guaranteed period cannot extend beyond your life expectancy, as specified in IRS Life Expectancy Tables. Also, if you elect a Joint Life policy covering you and someone other than your spouse, there are additional restrictions that apply for your policy to satisfy RMD requirements.
The Lifetime Income Annuity may allow you to take advantage of a number of tax benefits, but the tax treatment of annuity income payments is complex. Consult your professional tax advisor to understand fully how purchasing a Lifetime Income Annuity will impact your personal tax situation.
Perfect for Rollovers
Whatever you do in retirement, you may need to decide what to do with your IRA, 401(k), 403(b), governmental section 457 plan or other employer- sponsored retirement plans. You have several options, of course, including purchasing CDs, bonds, or stocks. Cashing out can be costly—especially if you’re younger than age 59½. Rolling some, or all, of your retirement plan assets into a Lifetime Income Annuity can turn that money into a steady stream of income that you can enjoy throughout your retirement.
A Valuable Financial Tool
A Lifetime Income Annuity can be a useful financial tool to incorporate into any portfolio. The income from the annuity can be used to help support daily living expenses, subsidize your favorite hobby or charity, or even fund the purchase of other financial products—such as long-term care insurance or life insurance.
In addition, knowing that your vital, basic expenses will always be covered—no matter how long you live—will enable you to prudently spend your other assets, especially because your need for discretionary income may decrease as you grow older and are less likely to be active. A Lifetime Income Annuity can help give you the peace of mind to live the retirement you want and to maintain the quality of life you deserve, so that tomorrow can be as good as today.
New York Life The Company You Keep®
When you purchase a Lifetime Income Annuity to pay income benefits for the rest of your life, you want that annuity to be backed by a strong financial services leader, one that will still be thriving 20, 30, 40 years from now—and beyond. At New York Life, a lifetime guarantee made today offers a steady income tomorrow, to help you live the retirement you’ve worked for and deserve. That’s a promise as good as gold.
Since 1845, New York Life Insurance Company, the parent company of New York Life Insurance and Annuity Corporation, has been providing quality insurance products to individuals, families, and businesses. Our financial strength is affirmed by the four major independent ratings agencies, which consistently award New York Life and New York Life Insurance and Annuity Corporation ratings that are among the highest.
For over 160 years, we have conducted our business around the central values of financial strength, integrity, and humanity, and we have remained committed to being a mutual company, owned solely by our policyholders. This means that, regardless of the economy, our focus is fixed on just one objective: meeting the needs of our customers, now and far into the future. When you purchase a Lifetime Income Annuity, you’ll have the advantage of working with a New York Life agent. New York Life agents are among the most highly trained and knowledgeable in the business, and they add tremendous value by working closely with you to tailor solutions that meet your unique financial needs. Talk to your New York Life agent today and find out why we are The Company You Keep.®
1 Congressional Budget Office, 2005.
2Public Misperceptions About Retirement Security, LIMRA International, Inc., 2005.
4Annuity 2000 Mortality Tables
6 Guarantee is based on claims-paying ability of the issuer.
7 Source: New York Life Investment Management. A hypothetical untaxed portfolio of 50% equity and 50% fixed income would last 27.5 years at an 89.5% confidence level, if withdrawals were taken at an inflation adjusted 4% per year. The historical annual data, from 1926 through 2005, is from Ibbotson Associates. Equity returns were modeled using the S&P 500 Index. Fixed income returns were modeled using the Ibbotson Long-Term Corporate Bond Associates Index. Inflation readings were taken from Ibboton inflation data. The confidence level was derived by taking a Monte Carlo simulation of 10,000 trials with random returns drawn monthly from the Ibbotson data. The model assumed an annual fee of 125 basis points.
8 The estimated payout rate above us based upon a male aged 65 and includes an inflation adjustment to the payout of 3% per year. Payout rates are based on annual payments that include principal and interest.
9 This hypothetical example is used for illustrative purposes only. It assumes an initial premium of $100,000 and a 5.0% annual interest rate for a Single Life Only policy. Actual results will vary.
10 Income payment generally begin one payment period after the policy date. If you choose to receive a monthly income, your payments will begin one month after the policy date, whereas if you choose to receive a quarterly income, payment will begin three month after the policy date. You may select the start date for receiving payments, but payments must being within one year of the policy issue date.
11Some features are not available on qualified policies, and some are not available in all jurisdictions.
12 The payout you choose, as well as your age and gender, will affect the amount of each income payment, so be sure to discuss these factors with your insurance professional. The annuitant must be younger than age 90 and, for qualified policies, the primary annuitant must be at least 18 years old. Not all payment options are available for all ages.
13If your Joint Life with Period Certain policy includes a survivor income that is less than 100% of the income while both of you are alive, the reduction in income will not take place until the first annuitant's death or the end of the guaranteed payment period, whichever is later.
14 If the total payment you receive prior to your death equal or exceed the initial premium you paid for your policy, then no further payments will be made to beneficiaries upon your death.
15 The Percent of Premium Death Benefit payout option is not available on qualified policies. It is also not available in New York or Washington.
16 Please consult with your professional tax advisor.
17 Reduction of benefits is not available on Joint Life with Cash Refund policies or on Joint Life policies with the Income Enhancement Option.
18 The Annual Increase Option is available on qualified and non-qualified policies. The policy owner must elect the Annual Increase Option at the time of purchase and be at least 59½ at the time of the first payment. The Annual Increase Option is not available with either the Changing Needs Option or the Income Enhancement Option.
19 The Changing Needs Option is available only on non-qualified policies. The policy owner must elect the Changing Needs Option at the time of purchase and be at least 59½ at the time of the first payment. The annuitant must be 80 or younger at the time of purchase, and the one-time adjustment to income payments must occur prior to the annuitant’s 91st birthday. The exact date and percentage of the changing need must be determined at the time of purchase. The Changing Needs Option is not available with either the Annual Increase Option or the Income Enhancement Option and it is not available in all jurisdictions.
20 The Income Enhancement Option is available only on non-qualified policies. The policy owner must elect the Income Enhancement Option at the time or purchase and be at least 59½ at the time of the first payment. The annuitant must be age 75 or younger at the time the policy is issued. The Income Enhancement Option is not available with either the Changing Needs Option or the Annual Increase Option, and it is not available in all jurisdictions. If electing a Joint Life policy, there may be no reduction of benefits.
21 The higher income benefit will be paid if the 10–Year Constant Maturity Treasury (CMT) Index in the third full week of the calendar month immediately preceding the fifth policy anniversary is at least two percentage points (i.e., 200 basis points) higher than the 10–Year CMT Index in the third full week of the calendar month immediately preceding the policy date. The higher income benefit would begin on the first scheduled payment after the fifth policy anniversary.
22 If on the fifth policy anniversary, the benchmark index has not increased sufficiently, you will not receive the increase in your payments, but will continue to receive the original, guaranteed income payment amount.
23The cash withdrawal amount is subject to an Interest Rate Change Adjustment that will increase or decrease the withdrawal amount based on the change in interest rates, as measured by the 10–Year CMT, between the time you purchase your policy and the time you elect to receive the cash withdrawal. The 30% Cash Withdrawal feature is not available after the annuitant’s life expectancy.
24 Policies offer either the “Up to 100%” Cash Withdrawal feature or the 30% Cash Withdrawal feature but not both.
25For Joint Life policies, full annuity payments will resume for the life of the policy at the end of the guaranteed payment period if at least one of the annuitants is alive at the time.
26 The guaranteed payment period for the Life with Cash Refund payment option is determined by dividing the premium paid for the policy by the annualized income benefit amount.
27 The non-medical financial loss provision is not available in all jurisdictions. Ask your insurance professional for details.
28 The available payment options may be Single or Joint Life.
29 The federal income tax of an immediate annuity that contains a withdrawal feature, such as the Payment Acceleration and the Cash Withdrawal and features, is uncertain and the IRS may determine that the taxable amount of the annuity payments and/or withdrawals received for an year is different than the amount reported by New York Life. For non-qualified policies, the exercise of a withdrawal feature may extend the period over which a policy owner may recover the investment in the contract, and may limit the policy owner’s ability to fully recover the investment in the contract over the annuity payment period because of the reduction or elimination of future annuity payments. The policy owner should consult with his or her own tax advisor prior to exercising a withdrawal feature under an immediate annuity.
30If the policy owner purchases a policy with a withdrawal feature, such as the Payment Acceleration and the Cash Withdrawal feature within five years form the date of the first annuity payment (and after the policy owner has attained age 59½), then a 10% penalty tax (plus interest) may be imposed retroactively on any annuity payments received before the policy owner attained age 59½. The 10% penalty tax would be in addition to the ordinary income tax on the taxable amount of the lump sum withdrawal. The policy owner should consult with his or her own tax advisor prior to exercising a withdrawal feature under an immediate annuity.
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