CEO Blog: It’s Time to Stop One-Sided Retirement Planning


Americans have lost more than $2 trillion in retirement savings in the last three and a half years. A recent AP poll says 42% of Baby Boomers surveyed said they’d delayed retirement due to lost money in their retirement plans, personal investments or real estate during the recent economic meltdown.

Yet many retirement planners only advocate the stock market and investment products as retirement savings solutions, skipping Baby Boomers’ needs for safer alternatives. Additionally, the government has expressed concern that current defined contribution plans do not adequately provide options for guaranteed lifetime income. The upshot — One-sided, market-dominated planning advice that only further endangers retirement.

This is dangerous because it can limit understanding of retirement planning options and opportunities. And, like “one size fits all,” one-sided rarely fits all. Indexed annuities can provide another vehicle for retirement savings used alone or alongside many other traditional investments – They’re insurance products designed to protect principle, create the possibility of higher interest earnings than traditional fixed rates products and have options for providing guaranteed lifetime income.

Indexed annuities have emerged as the product of choice for consumers, representing nearly half of all fixed annuity sales for 2010. The popularity of indexed annuities underscores consumers’ need for savings protection and the value of guarantees, which have never been greater as consumers strive to achieve financially secure retirement. The popularity of these products is also driving the securities industry’s competitive motives for feeding the media negative information about indexed annuities.

The critics often cite lack of liquidity, decreased ability to take advantage of market upside and questionable sales practices to steer American’s away from fixed indexed annuities. The critics are not only misinformed, but they are more often than not protecting their own interests as financial planners who sell stocks, bonds and other competing financial instruments.

A traditional staple of financial planning is assessing individual risk tolerance. Yet, as recent economic, environmental and geo-political events have demonstrated, risk is global as well as individual and can be triggered by Mother Nature as well as the board room. No one financial product can meet every individual’s needs and no one financial product can insure a secure retirement. We believe the answer lies in customized retirement planning strategies that harness right combination of products. This means evaluating the potential benefits of all products, including indexed annuities and not classifying the entire offering as unsuitable or inappropriate.

Americans are living longer and retirement assumptions around social security, government employee pensions, corporate matching programs and public sector vs. private sector responsibilities are being challenged. We support the adage that time is the biggest ally to successful retirement planning but so is a multi-dimensional approach and portfolio. It’s time indexed annuities are acknowledged as a financial vehicle worthy of retirement planning consideration and including in the retirement planning conversation.

Anything less offers only one side of the portfolio pie.

Wendy Waugaman is Chief Executive Officer and President of American Equity Investment Life Holding Company as well as a member of the Board of Directors and has been with the company since 1999. Before becoming an employee, Ms. Waugaman served as outside corporate counsel for American Equity from its inception in 1995. Ms. Waugaman is a member of the following professional associations: the American, Iowa State and Polk County Bar Associations; and the Iowa Society of Certified Public Accountants.