History of Annuities and Generating Retirement Income

​If you’re preparing for retirement, you may know better than anyone how many different financial tools and products are available to help you generate income and minimize risk. From a broad range of investment and insurance products to different account types, you have many tools at your disposal. It may be hard to make sense of your options.
 
You probably want to use the tools that are best aligned with your needs and objectives, and you likely want to implement strategies that have a long track record of success. One potential tool is an annuity.

Some people mistakenly assume that annuities are relatively new products. While annuities have evolved and changed over the years, like many other financial tools, they’ve actually been in use for centuries.
 
Various forms of annuities have been used since the times of ancient Rome. Even back then, many people faced a challenge similar to the one faced by today’s retirees: how to fund a long life span. Annuities serve a number of different objectives, but their primary purpose is to generate income. Thus, they can be useful to help resolve one of life’s toughest financial challenges. Below is a brief review of how annuities have been used and how they have evolved throughout history:

Annuas: The Use of Annuities in Ancient Rome
The first known annuities existed in ancient Rome in the third century. They were known as an annua, which was a contract between a buyer and a seller. The buyer would provide a lump sum of money, and the seller would provide a stream of income for the remainder of the buyer’s life. The buyer hoped to profit by living for many more years, while the seller hoped to have to make payments for only a limited amount of time.
 
Over time, large, formal organizations adopted the use of annuities. Churches used them to fund construction of new buildings. Governments offered them to raise money for war efforts. Some community groups organized annuity pools, allowing pool survivors to share remaining proceeds after a participant in the group passed away. Annuities became an important component of the world economy.

Annuities Arrive in the United States
Annuities made their first appearance in the United States in the early 19th century. Churches offered annuities to widows, parentless children and needy elderly congregants. Soon, though, annuities were offered by a number of groups, including businesses, state governments and the military.
 
In the 1930s the U.S. government essentially became an annuity provider for the masses when it created Social Security. In the 1950s, programs like TIAA-CREF began offering deferred annuities to teachers, health care workers and others.

Annuities and Today’s Retirees
In recent decades, annuities have evolved from being niche financial products to becoming popular tools that are helpful in addressing retirement challenges. Many companies today offer annuity contracts, and they’re available in a broad range of types.
 
You can find annuities that limit downside market risk, provide guaranteed* lifetime income and even help pay for long-term costs. Some annuities offer market exposure. Others pay a fixed interest rate. Some annuities are very similar to the original annuas of ancient Rome and simply pay a stream of income in exchange for a lump-sum contribution.
 
An annuity could be a useful tool for your retirement strategy. However, it’s important to choose an annuity that meets your unique needs and objectives. A financial professional can help you determine whether an annuity is right for you.

Ready to explore annuity options? Let’s talk about it. Contact us at Carstens Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
Annuities are insurance products backed by the claims-paying ability of the issuing company; they are not FDIC insured; are not obligations or deposits of, and are not guaranteed or underwritten by any bank, savings and loan or credit union or its affiliates; are unrelated to and not a condition of the provision or term of any banking service or activity
Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.  Annuities are long-term, tax-deferred vehicles designed for retirement and contain some limitations.
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