by Joe Signorella, CFP®, RICP® Updated: 6-11-2018
MetLife in 2014 has introduced a Deferred income annuity (DIA) which convert deposits to the insurance company in exchange for low cost guaranteed lifetime income later in life. In January 2016, MetLife announced their intent to separate part of their retail business which should included this product which will be rebranded Brighthouse Financial. Brighthouse Financial in 2017 will hopefully hold its current high financial ratings due to its still high asset size separation from MetLife. MetLife’s Guaranteed Income Builder or GIB was built to compete with the top selling New York Life Guaranteed Future Income Annuity II which captured 50% of the over $ 2 billion 2013 DIA market. The MetLife Guaranteed Income Builder Annuity replaces the “older” MetLife Longevity Income Guarantee Annuity (MetLife LIG), which was marketed as a pure longevity insurance product with only one income start date of age 85. Longevity insurance usually gives the retiree lifetime income starting much later in their life. Flexibility to start income at an earlier age was a key selling point for New York Life’s DIA and to compete MetLife has added some nice options which we will talk about below.
The hardest part of owning an income annuity for retiree’s was the loss of control of their “Retirement Nest Egg”. Brighthouse / MetLife realized this and installed some customizable rider options. First rider option is the "Cash out" option which allows you to receive all or most of your purchase payments back if your needs change during your contract period. This is the first in the industry to have a "walk away" of deposit after year 7 and lose nothing. The normal amount refunded is 92 to 100 percent back of the original purchase premium, depending on timing (see chart).
However selecting this option at issue will artificially reduce the amount of guaranteed income you could have without having the flexibility of the “Cash Out” rider. Looking at several MetLife/Brighthouse quotes with different ages and deferral periods the cash out option lowers the lifetime monthly income amounts by around 8%.
QLAC (Qualifying Longevity Annuity Contract) is a rule by the Internal Revenue Service that allows IRA owner to delay the required minimum distribution past age 70 ½. MetLife’s Guaranteed Income Builder annuity has a commuted value during the deferral period in line with the proposed QLAC rule enough to allow MetLife deferral of income to age 85 with the chosen income options of guaranteed periods or cash refunds. One of the only income annuities that allow you not to have to take your IRA required minimum distribution at age 70 1/2.
Flexibility to start your income sooner or later than originally planned twice during your annuity contract is an advantage most deferred income annuity don’t have but MetLife has included in their new DIA. This will give you access to your income that was seen as untouchable until your chosen start age in the future. MetLife also lets deferred income annuity owners in the deferral period split their original purchase premium into two parts and buy two income streams with different income start periods within a ten year time frame of the original income commencement date. Listening to the Baby Boomer market and younger MetLife has loaded up on option rich features to make this income product truly customizable for every pre-retiree and early retiree. For instant income annuity rate comparison visit our sister site www.QLACQuote.com.
To keep up the with rising costs in retirement MetLife Guaranteed Income Builder has a cost of living adjustment option of 2% to 4% which will automatically increase your income payments each year by the selected percentage amount at issue. This cannot be change or added after your income start date once your application is submitted. There is no CPI-U inflation linked increase option with MetLife, that option is only available with the Principal Deferred Income Annuity.
Have your constant lifetime income cover your basic expenses in retirement. This would include any social security, pensions, and annuity income like MetLife Guaranteed Income Builder. Studies have shown that converting a small portion, less than 50%, of your retirement funds to an income annuity will increase your portfolio income success rate over a 20-year time frame. By eliminating stock market risk with a purchase of MetLife Guaranteed Income Builder will produce lifetime income in retirement that cannot be outlived as the example graph below shows.
Article by Joe Signorella, CFP®, RICP®
Joe Signorella+ is a Certified Financial Planner™ specializing in retirement income planning. He has over a decade and a half of experience and is the CEO/Founder of LongevityInsurance.com. Joe also is one of the first five hundred Retirement Income Certified Professional® in the world. He's seen first hand the increase in retirement income by including a deferred income annuity and encourages everyone to get a free income annuity quote today. Have a question? Call toll-free: 1-800-325-1833
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