A Hybrid Solution
Daisy Maxey
Jul 16, 2007
Page 2 of 3
Some bigger players are eyeing the market closely. Prudential Financial (PRU), MetLife (MET), for instance, both say they are evaluating the combination vehicles.
Certainly, Americans need to do more to save for their retirement and long-term health-care needs. Medicare and Medicaid paid for more than 60% of the nation's nursing home and home health services in 2005, according to the federal Centers for Medicare & Medicaid Services, and the pending retirement of tens of millions of baby boomers is set to strain federal and state governments even further.
With many defined-benefit plans giving retirees the option to take their benefits either as an annuity or as a lump sum, and with defined-contribution plans, which typically offer no annuitization choice, becoming more popular, retirees need more efficient retirement savings vehicles, says Warshawsky.
Life-care annuities would eventually work well as an optional distribution mechanism from qualified retirement plans, Warshawsky says. That would require changes to Treasury and Internal Revenue Service regulations and maybe the law, and would be dictated by demand for the product, he says.
Life-care annuities "could be the next big product innovation for insurers," says Terence Martin, vice president of Hartford-based Conning Research & Consulting. And though he doubts the vehicles will solve Medicare's woes, they won't hurt, either. Says Martin: "Every little bit helps."
Visit Barron's at www.barrons.com for the latest financial analysis and commentary, updated daily.
Related Stories
Investors Should Ensure Nest Egg Doesn't Crack
by Jonathan Clements
Avoiding Annuities' Tax Hit
by Arden Dale
Do-It-Yourself Pensions
by Kelly Greene
AARP Lends Its Name, and Rolls, to New Annuity
by Jeff D. Opdyke
Top FiDeals
