Immediate annuity and deferred annuity payout rates were up this month for most insurers as the yield on the 10-Year Treasury, which is a good proxy for annuity pricing, reached its highest point since the first quarter of 2017. If you have been considering an income annuity purchase, now may be a good time with the improved pricing.
Immediate annuity payout rates were down this month for most insurers as the yield on the 10-Year Treasury, which is a good proxy for annuity pricing, fell in November. Deferred Income Annuity pricing remained constant this month.
This month, annuity prices didn’t change much. We also discuss the value of an income annuity, and highlight a study by Morningstar on the impact of guaranteed income on safe withdrawal rates from portfolios.
There were no major changes in annuity pricing this month. With the volatility in recent interest rates, we highlight research from a Princeton professor on the relationship between interest rates and annuity pricing. In summary, every 100 basis points of change in the 10 year T-note has resulted in a 65 basis point change in annuity payout rate.
The 10 year T-note finishes the month at 2.4%, around where we were in November, stopping insurers from increasing annuity rates this month. Additionally, the uncertainty on the direction of interest rates has us working with clients to create long-term income purchase plans instead of one-time purchases. Finally, we are hosting a retirement income webinar to help you understand whether a Retirement Spending Analysis is right for you.
This Sunday’s New York Times featured the article “Making Your Money Last as Long as You Do” by Mark Miller which quoted our CEO Matt Carey. The decline of traditional pension plans and increasing longevity present a significant challenge to Americans nearing and planning for retirement. The article outlines four strategies you can use to mitigate this risk, including the consideration of annuity as a part of your retirement strategy.
Bond yields continued to go up in early December, which has caused annuity payouts to go up again. Based on the fact that yields have declined over the last couple weeks, we expect annuity payouts will more likely than not decline or stay the same when carriers next update their models. It varies from insurer to insurer, but there’s typically a couple weeks to as much as a month of lag between when bond prices change and when they’re reflected in annuity pricing.