1 Looking for income during your golden years? A fixed annuity may be the vehicle to help you accomplish your goal. The Road to Retirement In partnership with:
2 What industry can claim that its more than 50 million customers have invested $13 trillion in its products? The answer: the fixed-annuity industry, which expects to add even more weight to those totals in the years ahead. The bumper crop of babyboomers entering or about to enter the age of retirement is one reason for the optimism. Demographics is a big plus-factor in our business, says Thomas C. Godlasky, president and CEO of Aviva North America, an affiliate of the world s fifth-largest insurance company. People are moving away from the accumulation phase of their financial assets and into the incomedistribution phase. This means an emphasis on products with guarantees and less exposure to market risk. T he A BCs of A nnui t ies An annuity is a financial product, usually sold by an insurance company. A buyer may pay a lump sum at the start or put in additional funds later down the road. The insurance company invests the funds, and the buyer receives periodic payments that begin either immediately or at a point in the future. These instruments come in a wide variety of shapes and sizes, but there are two types: fixed annuities, which promise a minimum guaranteed fixed amount over a stipulated period; and variable annuities, whose returns fluctuate up and down with financial market conditions. One major advantage of annuities is that no tax is due on the earnings they generate until funds are actually paid out. Annuities have a long history. Scholars have traced their origin as far back as ancient Rome, and over the centuries a number of variations have developed. Back in 17th-century France, individuals put their funds into tontines and received payments for as long as they lived; whatever funds were remaining went to the last survivor. In the U.S., annuities have been available for more than two centuries. Sales of fixed annuities tend to level off when stock prices boom, as buyers are more tempted by the opportunities for growth in the markets than the desire for safety. But when stocks slump, buyers return to fixed annuities (see accompanying chart). Last year, sales of fixed annuities rose 7.6%, and that increase has continued at a higher rate in In 2005, the Gallup Organization profiled owners of non-qualified annuities (meaning those bought with aftertax dollars and not part of a pension, IRA, or 401(k) plan). The average age of today s annuity buyer is 66, but the proportion of younger first-timers is rising sharply. Those buying before they hit 50 rose from 28% in 2001 to 39% four years later. Nearly nine out of ten still have the first annuity they purchased. In general, buyers have moderate incomes; two-thirds had annual household incomes below $75,000 and only 18% had incomes of more than $100,000. More women than men own annuities, a trend that s been increasing in recent years. Reasons for buying were fairly consistent: safety; the deferred-tax advantages; an effective way to save for retirement; ensuring that a surviving spouse would have continuing income; and providing a good source of emergency funds in case of a catastrophic illness or a lengthy nursing-home stay. S
3 Jack, your word is Allianz: America s leader in fixed index annuities. AH-lee-ahnz. It's perplexing. We re Allianz Life the nation s leader in fixed index annuity sales for eight years running.1 And we re part of Allianz SE, the 14th largest company in the world.2 Even so, most Americans can t pronounce (much less spell) our name. Fortunately, the people who do know us are our customers. They ve learned how an Allianz annuity can be an important part of their financial strategy. Find out for yourself. Visit to view our Why Allianz video. Allianz: Financial solutions from A to Z. 1 2 Allianz Life Insurance Company of North America (Allianz Life); National Underwriter, Forbes Global 2000, Forbes, April 21, Forbes ranking is based on a composite of sales, profits, assets, and market value. Allianz Life Insurance Company of North America Allianz Life Insurance Company of New York Products are issued by Allianz Life Insurance Company of North America, and in New York, by Allianz Life Insurance Company of New York, New York City. Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Allianz Life Insurance Company of New York is authorized to sell insurance and annuities in New York. ZAD-1077 (5/2008)
4 Today s annuities, which come in individual or group plans, generally include death benefits, withdrawal and payout opptions, and benefits triggered by disability or incapaciation. Many charitible and educational institutions offer tax-deductible contracts that pay the insured for life, with any remaining funds going to the sponsoring organization. Variable annuities, which are subject to investment risk, fall under federal securities regulation. Fixed annuities are considered an insurance product and are state-regulated. Fixed-annuity customers are generally looking for a balance between protection and income with sensible tax advantages, says Gary Bhojwani, president and CEO of the Minneapolis-based Allianz Life Insurance Co. of North America. He stresses the industry s need to instill and maintain consumer confidence. We don t sell a tangible item, he says. We sell reputation and trust. A F u t ure S a f e t y Ne t Kevin R. Wingert, president of the Des Moines based American Equity Investment Life Insurance Co., is convinced that the most compelling benefit of fixed annuities is the assurance consumers have that their nest eggs are not vulnerable to market volatility. As he sees it, an increasing number of pre-retirement baby-boomers are buying annuities out of a conviction that they must go beyond Social Security and employer-funded plans to meet their retirement needs. We re selling peace of mind and what I like to call sleep insurance, he says. We re the safe-money people for retirement money. According to Aviva s Godlasky, annuities should play an important role in an individual s or family s assetallocation decisions. How much depends on the consumer s age, needs, and lifestyle, he says. It s not a matter of one size fitting all. A P opul a r re t iremen t t ool Sales of fixed annuities tend to rise when stock prices slump. Some annuity sellers have been accused of highpressuring potential customers and not disclosing such matters as high surrender fees for early withdrawals from a plan. They have also been criticized for selling policies that are not suitable for elderly consumers, who are among the most vulnerable. A number of lawsuits have been brought alleging such (in billions) abuses. But while industry officials concede there have been some bad apples among the agents, stockbrokers, investment advisers, and others who sell their products, they reject any suggestion that such practices are widespread. They insist such cases present unbalanced portraits of the industry and scare potential customers away from products that would be appropriate for them. Not all plans are created equal, says Sam Beller, a New York annuity specialist, who points out that underlying guarantees vary according to companies and the plans they offer. He urges annuity buyers to make sure the contract is suitable for them and for their level of risk tolerance. In addition, he warns, be wary of anyone offering annuities with double-digit returns, which are totally unrealistic. Make sure you re dealing with a quality company and a trustworthy agent. Se t ting Industry Standards Kim O Brien, executive director of the National Association for Fixed Annuities (NAFA), points to continuing efforts to strengthen the industry s disclosure standards and address sales practices. A model law protecting fixedannuities buyers developed by the National Association of Insurance Commissioners is in place in most states, she says, and is being enforced by insurance companies S
5 prosper. Not just a familiar adage, but a reality. With an annuity from Aviva, you don t have to worry about outliving your retirement income. We offer a variety of products and payout options including guaranteed income for life. Let us help you look forward to a bright future. Ask your financial professional about Aviva today. Aviva s indexed life insurance and annuity products are issued by and all policy benefits are the responsibility of Aviva Life and Annuity Company, American Investors Life Insurance Co., Inc., Indianapolis Life Insurance Company and Aviva Life and Annuity Company of New York. In New York, available products are issued by Aviva Life and Annuity Company of New York, the only company authorized to do business in New York. Products not available in all states.
6 More women than men own annuities, a trend that s been increasing in recent years. as well as state regulators. In addition, NAFA established a Market Conduct Committee last September to foster increased focus on suitability, marketing, and recruiting to provide a safe and informed environment for consumers. Allianz s Bhojwani, whose company was the first to designate a chief suitability officer, says it has adopted an extensive program of vetting new applications for annuity contracts to make sure they are appropriate. He is strongly optimistic about the future of the annuities business in general. There are a number of trends that make this a period of growth like no other, he says, citing longer lifespans, the impending transfer of wealth from one generation to the next, and declining confidence in traditional retirement funds such as Social Security and corporate pension plans. We see a time, he asserts, when we can make a difference in people s lives like no other period before, and like no other industry. Aviva s Godlasky is also enthusiastic about fixedincome annuities, and he is particularly proud of a program called Wellness for Life his company recently introduced in cooperation with the Mayo Clinic. Designed to help policyholders lead a healthy lifestyle, it provides a variety of services and products, including a health assessment, personal wellness web portal, and 24-hour access to the clinic s nurse line. To make things better, customers can obtain cost savings on their premiums by having regular physical examinations and maintaining a body weight within an established range. To advertise in our Annuities sections, contact Linda Lydon at For reprints, call Jo Mattern at P eace of mind for your retirement savings is our mission. Are guarantees against market volatility and income you can t outlive important to you? If so, then please call us. Learn how American Equity s Fixed Index Annuities can protect your retirement and peace of mind. Call Us Toll Free at West Des Moines, IA FORT