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Fast Company
3 days ago
- Business
- Fast Company
Here's why Trump's plan is unlikely to fix America's dystopian prescription drug problem
Most of us Americans have first-hand experience with the broken state of the U.S. prescription drugs market. In March, our son said his ADHD medication wasn't working anymore. We set up an appointment with his pediatrician–which is when the Kafka-esque insurance wrangling began. The doctor prescribed a medication listed on our insurer's published formulary (the list of prescription drugs, whether brand name or generic, covered by its policies). The insurer denied the prescription, then denied the prior authorization our pediatrician submitted. Then we learned the published formulary was incorrect. We got a copy of the correct formulary and tried again. We had to call around to find a pharmacy that had the new drug in the generic form (since the name brand isn't covered), only to have the prescription denied again. Rx Frustration Redux The insurer told our doctor that a prior authorization was required, even though this medication is on the preferred formulary, so the pediatrician dutifully submitted that paperwork. Several days later, this prior authorization was also denied. The pediatrician's nurse practitioner called the insurer, 'threw a bit of a fit,' and got the insurance company to follow its own rules.
CBS News
22-05-2025
- Business
- CBS News
Can an annuity run out of money?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Before you count on an annuity to provide income during retirement, make sure you know if the payments could end. Getty Images There aren't a ton of retirement products that can guarantee you a steady income stream until you die, but annuities, which are pitched as a way to ensure you won't outlive your money during retirement, are one of them. With an annuity, you hand over a lump sum of money to an insurance company, and you get a reliable stream of income in return. That predictability can be extremely valuable in any economic landscape, but it may be especially appealing right now, given how volatile the stock market has been, how much longer people are living and the economic uncertainties that are looming. But as reassuring as annuities may seem, the reality is that these retirement products can also be quite confusing. There is a wide range of annuities to choose from, after all, and there are different terms, payout structures and investment options that can make annuities function quite differently from one another. That leaves many future retirees wondering what exactly they're signing up for, and whether those steady payments they've been promised will really last as long as they need them to. So, do annuities deliver on the promise of giving you a steady income stream for life? Or can an annuity run out of money and stop paying? Below, we'll take a closer look. Add an annuity to your retirement plan today. Can an annuity run out of money? Whether or not an annuity can run out of money depends heavily on the type of annuity you have. In general, immediate and lifetime annuities are designed not to run out of money as long as the issuing insurer remains solvent. That's because these annuities guarantee income for life, no matter how long you live. Once you hand over a lump sum to the insurance company, the insurance company takes on the longevity risk. So, even if you live to 100, they're contractually obligated to keep paying you. That means as long as the insurer is still in business, any general, immediate and lifetime annuities you open are contractually obligated to continue your payments, and the only way that will change is if the insurance company goes out of business. However, there are scenarios where an annuity can and will stop providing income. These include: When you choose a fixed-term annuity: A fixed-term annuity pays out for a set number of years (like 10 or 20) and then stops. Once the term ends, so do the payments. A fixed-term annuity pays out for a set number of years (like 10 or 20) and then stops. Once the term ends, so do the payments. If you open a variable or indexed annuity: These types of annuities can be tied to investment performance. If the underlying investments perform poorly and there are no riders or income guarantees in place, your cash value could be depleted. These types of annuities can be tied to investment performance. If the underlying investments perform poorly and there are no riders or income guarantees in place, your cash value could be depleted. When you open an annuity with a withdrawal rider: Opening this type of annuity may allow you to draw a certain percentage annually. If you exceed that amount or take additional withdrawals beyond what's recommended, the account can run out of money faster than expected. Opening this type of annuity may allow you to draw a certain percentage annually. If you exceed that amount or take additional withdrawals beyond what's recommended, the account can run out of money faster than expected. If there's an issue with poor planning or misuse of annuity funds: If you're doing things like pulling large lump sums or surrendering the annuity early, it can also reduce or eliminate your income potential. It's worth noting that while many annuities offer "guaranteed income," those guarantees are only as solid as the financial health of the insurer. If the company goes out of business, your payments could be at risk, though some protections exist at the state level. Compare your options and secure your guaranteed annuity income now. Worried about losing your annuity payments? Use these strategies now If you're worried about outliving your annuity, it may be worth using these strategies and safeguards to help protect against losing your payments later in retirement: Choose a lifetime income annuity This is the simplest way to ensure payments last for as long as you live. Lifetime annuities typically provide lower monthly payouts than term annuities, but they offer the peace of mind that you'll never outlive your income. Add an income rider Some annuities, like variable and indexed annuities, offer optional income riders for an extra fee. These riders often include lifetime income guarantees, even if your account value drops to zero. Just make sure you fully understand the terms before committing. Diversify your retirement income Don't rely on an annuity alone to get through retirement. Combining annuity income with other types of retirement income, like Social Security, pensions, investment withdrawals and emergency savings, can help prevent financial gaps if one stream slows or stops. Research the insurance company Annuity payments are only as safe as the company issuing them. Look for providers with strong financial ratings from agencies like A.M. Best or Moody's. You can also check your state's guaranty association for information about coverage limits in the event the insurer fails. Watch your withdrawal habits If your annuity has a free withdrawal clause or allows regular distributions from your principal, don't be tempted to pull more than what's recommended. Overdrawing can shorten the life of your contract and diminish any future income. The bottom line If you're considering adding an annuity to your retirement plans, don't just assume that guaranteed means foolproof. Annuities can run out of money, but whether yours lasts depends on the structure of the annuity, how you use it and how well the insurance company behind it holds up. Some products, like lifetime immediate annuities, are designed to provide income you can't outlive, while others, particularly those tied to investment performance or limited terms, carry more risk. So, make sure you're doing your homework, choosing the right annuity and adding the right features to mitigate the chances that your payments stop before you're ready for them to.
Yahoo
21-05-2025
- Business
- Yahoo
5 things every couple needs to know before buying a joint annuity
When you're planning for retirement as a couple, figuring out how to make your money last through both of your lifetimes is a top priority — but it isn't always easy. Joint and survivor annuities are sometimes floated as a potential solution to that piece of the retirement puzzle. On paper, it sounds like a no-brainer: Guaranteed income that continues for both your life and your spouse's life. But like most things involving annuities, the devil is in the details. This article unpacks how joint and survivor annuities work and the trade-offs couples need to understand before buying one. Here's what you need to know. A joint and survivor annuity is a type of retirement income product designed for couples. You pay a lump sum or series of payments to an insurance company, and in exchange, they guarantee a monthly payout for the rest of your life — and your spouse's life too. When the first spouse dies, the surviving spouse continues receiving monthly payments, either in full or at a reduced rate, depending on how the annuity was structured. This type of payout option is especially common when someone retires from a job with a traditional pension plan. In fact, federal law requires most employer-sponsored pension plans to default to a joint and survivor payout unless both spouses agree to something else. However, even if you retire without a pension, like most private sector workers, you can still purchase an annuity with a joint and survivor payout from an insurance company on the open market. The terms 'joint annuity' and 'joint and survivor annuity' sound interchangeable, but they're not. A jointly owned annuity has two owners on the contract. If one dies, the policy typically pays out a death benefit and ends — unless you have a rider that specifies otherwise. With a joint and survivor annuity, it's different. The contract is set up to keep making payments to the surviving spouse after the first one dies, following the payout schedule you agreed to in your contract. It's designed for lifetime income, not a lump-sum death benefit. A joint and survivor annuity payout isn't inherently good or bad — it's a tool. Whether it's right for you depends on numerous factors, including your overall financial situation, income needs, health, age and your spouse's age and financial acumen. Let's break down what you need to consider before buying this type of annuity. Joint and survivor annuities always pay less per month than single life annuities. That's by design. The insurance company is committing to pay out over two lifetimes instead of one — and that extended timeline means they have to spread your initial investment over a longer period. The longer the likely payment window, the lower the monthly benefit. How much lower? That depends on how long each of you is expected to live (insurance companies use actuary tables to determine that) as well as the structure of the contract and other factors. But on average, you can expect a joint and survivor payout to be roughly 9 percent to 17 percent lower per month than a single life payout. How much a surviving spouse receives is customizable. The most common survivor benefits are 100 percent, 75 percent and 50 percent. Opting for a higher survivor benefit — like 100 percent — means you'll get smaller monthly payments up front, but the surviving spouse will continue receiving the full amount for life. Choosing a lower percentage, such as 50 percent, bumps up the initial payout but cuts the survivor's income in half once one partner passes away. That's the trade-off in a nutshell: More security later, or more income now. If both spouses have other sizable income sources — like Social Security, pensions or savings in a retirement plan — it may not make sense to opt for the full 100 percent benefit. But if one partner depends heavily on the other's income, the 100 percent option offers better peace of mind. Splitting up assets in a divorce is rarely easy but the process can get even more irksome when you throw an annuity into the mix. If you purchased a joint and survivor annuity while you were married, chances are it's considered marital property. That means the contract can be split, its value offset by other marital assets or it can be canceled entirely. But it's not always a clean break. The type of annuity matters. Some contracts are more flexible and easier to divide, while others can be a nightmare. Figuring out the actual present and future value — especially with variable annuities or fixed index annuities — gets complicated fast. You have to factor in surrender charges, bonuses, benefit riders and other fine print. These details can all impact how much the annuity is actually worth and how it ends up being divided in the settlement. There's always potential tax hits, surrender fees and long-term implications to consider. If you already have an annuity and you're getting a divorce, don't make any final decisions without legal and financial advice. If there's any chance of divorce — and statistically, there's always a chance — you need to understand how locked-in your joint and survivor annuity terms are and what flexibility you have in changing the contract later. Instead of putting a big chunk of your retirement savings into one contract, consider whether you're better off bypassing an annuity all together. Sure, annuities offer peace of mind — but they also tie up your money in exchange for predictability and lower returns. You might be willing to make that compromise if, let's say, money management isn't a strong skill or your spouse doesn't have many retirement assets of their own. But if your retirement plan is already well-structured and diversified, you may not need to lock up such a large portion of your assets in an annuity. Similarly, if you like the idea of higher potential returns, fewer fees and less complexity, you might consider working with a fee-only financial advisor. Paying that financial advisor an ongoing retainer to manage your portfolio as you age and assist you with a withdrawal strategy might be cheaper than buying a joint and survivor annuity. After all, most financial advisors charge a 0.25 to 1 percent fee on the assets they manage for you. Meanwhile, it's not unheard of for annuity contracts to charge 3 percent or more in fees, commissions and add-on costs. As you solidify your retirement plan, get all options on the table. You might discover that an annuity — any annuity — isn't right for you. Need an advisor? If you're looking for expert guidance when it comes to managing your investments or planning for retirement, Bankrate's AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals. The truth is joint and survivor annuities don't always pay off. Depending on how long you both live, you might lose more through reduced payments than your spouse gains in survivor benefits. To demonstrate how, imagine Mark, a 65-year-old man, is evaluating two annuity options: The first option is a single life annuity that pays a monthly income of $2,200 for his lifetime, but payments end when he dies. The second option is a joint and survivor annuity with a 50 percent survivor benefit. It pays $2,000 per month during his lifetime — $200 less than the single life annuity. If Mark dies before his wife, she'd receive 50 percent of this amount, or $1,000 per month, for the rest of her life. Based on life expectancy estimates, Mark anticipates living another 25 years, while his wife is projected to live an additional 29 years. So if Mark chooses the joint and survivor annuity, he'd receive $200 less per month for the next 25 years, or a total of $60,000 over his expected lifetime. After he dies, his wife would receive $1,000 per month for the rest of her estimated life — four years — amounting to $48,000 in total payments to her. Ultimately, by selecting the joint and survivor annuity, Mark would potentially forgo $60,000 in lifetime payments, while his wife would stand to receive $48,000 after his death. That's a $12,000 net loss compared to the single-life annuity scenario. Of course, everyone's situation is different, but make sure the math actually works in your favor before signing a contract. Joint and survivor annuities can be a viable option for couples who want guaranteed lifetime income for both partners; however, that peace of mind comes with trade-offs: lower monthly payouts, higher costs for full survivor benefits, potential complications in a divorce and the risk of leaving money on the table. If you're not sure what's right for you, talk to a fiduciary financial advisor who can help you weigh the pros and cons based on your retirement goals. And don't let uncertainty or fear push you into a product that overpromises and underdelivers. Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
