Millions of Americans face worrisome financial challenges during their retirement. For many, anxieties have intensified recently due to the market upheaval caused by the COVID-19 pandemic.
Fortunately, there is a surefire way to address those concerns: an annuity.
June is Annuity Awareness Month, a time to focus Americans on the only financial product in the marketplace that offers guaranteed income for life.
The peace of mind – and steady reliable income – that annuities provide is especially valuable during times of market volatility.
An annuity is an enforceable contract between a consumer and a life insurance company. The consumer pays a premium(s) to an insurer, which commits in writing to pay the consumer income.
There are a variety of annuity options available. Some offer income now (immediate) and some later (deferred). Either way, annuities offer the owner guaranteed income for life. Annuities can also provide income to survivors.
Robust state and federal consumer protections govern annuities. In February, the National Association of Insurance Commissioners (NAIC) adopted an enhanced model regulation that requires financial professionals to act in the best interest of consumers. It enhances the information consumers get to make informed purchasing decisions. It also retains vital consumer access to information and education about annuities.
Iowa has led the way, becoming the first state to adopt this regulation. It goes into effect on January 1, 2021.
The NAIC’s model regulation closely aligns with the Securities and Exchange Commission’s Regulation Best Interest (Reg BI). Reg BI, which goes into effect on June 30, requires broker-dealers to comply with explicit obligations to ensure they are acting in the best interest of their customers. It also retains the right of consumers to choose the type of financial services they want including one-time commissioned based support or ongoing advice with asset-based fees.
Together, Reg BI and the NAIC’s model regulation provide strong consumer protections. Americans looking to secure peace of mind in retirement with an annuity will have harmonized state and federal protections that support them regardless of which state they call home.
Jim Szostek is Vice President & Deputy, Retirement Security at the American Council of Life Insurers (ACLI). He helps guide ACLI policy on legislation and regulations affecting the U.S. retirement system. Prior to joining ACLI in 2008, he held positions at CIGNA and The Hartford.
