…The front page of section R, that is. Last Saturday’s Wall Street Journal featured an article with the eye-catching headline, “How to Bulletproof Your Nest Egg.” Following on the heels of an article which Annuity Monitor collaborated (see our recent blog post), reporter Kelly Greene discusses retirement savings and protection strategies, with perspectives from several retirement experts. While not an unqualified endorsement of annuity products, the article contains a fair, in-depth analysis that’s definitely worth the read.  We’d like to point out a few aspects we found particularly noteworthy.

First, one of the article’s sources is a figure whom we’ve encountered enough to be on a first-name basis - York University associate finance professor Moshe Milevsky. A preeminent expert on retirement finance, Prof. Milevsky conducts detailed analyses of annuity costs and benefits that have come up in our research on several occasions. Originally skeptical of annuities’ high fees, he has updated his conclusions in recent years to reflect evolving products and markets. Now, with living benefits offering real and unique guarantees, Prof. Milevsky’s work has been featured in promotional campaigns and materials from firms such as Pacific Life and Prudential.

Similar to the earlier article, Prof. Milevsky contrasts the differing advantages of variable annuities with living benefit riders versus managed payout funds. Additionally, he touches on longevity insurance, another newly-developed product that competes with annuities for the lucrative Baby Boomer retirement market. The three product types have different features and usages,  but the two new options do address some of annuities’ major selling points - primarily downside protection, but also growth potential or guaranteed income streams.

Finally, we’ll close with an issue that never seems to go away - annuity suitability. The fixed annuity industry has taken a black eye and continues to struggle to redeem its reputation from unethical marketing in past years. The article outlines simple, understandable tests that advisors or clients themselves can use to determine if an immediate fixed annuity will provide valuable income and protection, or simply be a gift to insurance companies.