Here ye, Here ye ...You are Living Too Long (cont'd)
Now is the Time to Act
Have you Been Considering An Annuity for your
Guaranteed Retirement Income ?
Guess What !? Time is Running Out.
Please consider this Seriously !
The NAIC (National Association of Insurance Commissioners
- “www.naic.org” ) will be adopting on January 1, 2016
the 2012 Mortality Tables that were developed by the
SOA (Society of Actuaries). This new table came about as
a result of gradually increased life expectancies in the
For a more academic reference of the new table, click here
These new reserve tables will generally affect negatively the income
guarantees on annuities, corporate and public pension benefits and
all IRS tables in general that reference U.S. life expectancies. Up till now, these
benefits have been premised on the year 2000 Mortality Tables.
Q) What is going on here, I don’t get it ?
A) Mortality tables are essentially statistical probabilities of death by age and are used by actuaries to accurately determine numerical benefits in various lifetime pension programs offered by governments, corporations and life insurance and annuity companies. The SOA’s recommendations are lawfully incorporated into the calculations used by these entities. The current numerical benefits associated with these plans are based on tables that were developed in the year 2000.
On Jan. 1, 2016, for many insurers, the Year 2012 Table will begin to replace the Year 2000 Table as the statistical reference from which these lifetime benefit plans are designed. The 2012 Table reflects the decreased statistical mortality in the American population.
Americans are living longer, due to :
* better access to Medical care, antibiotics and immunizations
* new diagnostic, surgical and life sustaining techniques and,
* better overall health education for the general population
Insurers, Governments and Corporations cannot legally nor
competently offer lifetime numerical benefits based on
inaccurate mortality tables. Since the Year 2000 table does
not accurately reflect current mortality tables, the 2012 Table
will be soon be used. The longer life expectancies based on
the new 2012 table will thus force these same entities to
reduce numerical lifetime benefits since these benefits must
now be paid over longer periods of time. Consequently, these
benefits will also be more expensive for these entities to offer.
So, if you have been recently considering an annuity for future guaranteed retirement income, consider taking advantage of plans that still use the 2000 Table:
Generally speaking, the benefits in annuities purchased prior to years end (December 31, 2015), that you may later desire to turn into lifetime income (either through an income rider or any form of annuitization) will be based on the Year 2000 Mortality Table. On the other hand, the benefits in annuities purchased after years end (December 31, 2015), that you may later desire to turn into lifetime income (either through an income rider or any form of annuitization) will be more likely to be based on the Year 2012 Mortality Table.
The bottom line is this, these income benefit products are going to be less attractive as time goes on, so if you are on the fence, get off of it, you’re only going to get slivers anyway!!
Q) What will the actual numerical difference be in terms of the guarantee offered?
Impossible to tell at this point. Various insurers are currently re-pricing their lifetime payout tables as we speak, and much of this information will not be available till early December, 2015.