Q&A with Annuity Actuary Lauren Minches, FSA
Lauren is the lead annuity actuary at Blueprint Income. She brings years of experience working with life insurance and annuity products at New York Life. Since joining the team in 2016, Lauren has worked with the Blueprint Income insurance providers to simplify and improve the annuity products on the platform. She is also responsible for much of the Blueprint Income web experience and educational materials. As someone passionate about helping Americans improve their financial security — especially as they age — she has been working hard to increase access to and understanding of guaranteed retirement options.
Why do people need annuities in retirement?
Well, not all people need annuities. And not all types of annuities are really needed at all. So let’s start with who doesn’t need them, and that’s people with pensions.
The purpose of an annuity it to provide steady income in retirement that you can’t outlive. That type of guaranteed monthly paycheck eliminates pitfalls and fears of market crashes or extra-long lives eroding one’s financial stability in retirement. But, if you already have that type of financial security through a pension (along with Social Security), you don’t need it through an annuity. Or, if you have so much wealth that market crashes and living to 100+ won’t harm you, you don’t need one either.
But, if you’re like most Americans, then your employer isn’t offering you a traditional pension like they once did, and you don’t have that much money. As you approach retirement with your salary-earning years behind you, your financial focus shifts to wealth preservation and income stability. That is, you want to know that things you can’t control — your lifespan and the markets — won’t affect your lifestyle. That’s where the annuity guarantee of income for life becomes important.
What are one’s considerations when buying an annuity?
There are many types of annuities out there, and to figure out what’s right, one needs to first-and-foremost be clear on what he/she wants to get out of it. Are you looking for a guaranteed return on your money? Or are you looking for guaranteed income, like a steady paycheck. If the answer is return, you likely want a fixed annuity. If the answer is income, you likely want an income annuity. Other types of products, like variable and indexed annuities, offer a mix of the two, but they tend to be more expensive and more complicated. That’s why we don’t offer them at Blueprint Income.
Once you’ve decided what type of annuity, you then need to look at the marketplace of options offered by the various insurance companies. You’ll typically see a trade-off between the insurance company’s rating (a measure of financial strength) and the return/income they’re able to offer. When it’s hard for individuals to choose an individual insurer, we work with them to create a portfolio of annuities spread across multiple insurers. This is similar to the mutual fund concept where you don’t pick individual stocks. Our Personal Pension offering actually does that automatically for you.
Beyond that, there are some product-specific options and features that need to be selected, and our team has guides available to help with each of those decisions.
As an Insurtech company, what is your relationship like with insurance companies?
While some Insurtech companies compete with insurance companies, we are not one of those. We work directly with or alongside insurers to improve the customer experience, provide better access, and innovate the products being offered.
The insurance company is laser-focused on financial strength and long-term stability. It’s these qualities that enable them to offer financial promises 50+ years out and have the reserves to back it up. Because of that focus, they have often had to “outsource” distribution, i.e. find other parties, like agents and brokers, to explain and sell their products. And that’s where we come in.
Technology has enabled a whole new type of shopping and buying experience for many product categories, ranging from books to homes to mutual funds. But, technology hasn’t really gotten to annuities yet. Still today, the vast majority of annuities are “sold, not bought.” We believe that’s because individuals don’t have access to the tools and information they need to make an educated decision, so they must rely on advice. We’re hyper-focused on solving that problem at Blueprint Income. In our first 4 years in business, we’ve tried to make an impact by bringing the annuity market online through our real-time quoting tools that connect to 30+ insurance providers and through our intelligent, non-salesy, easy-to-digest educational materials.