Editor's Blog

Aspects of Annuities, Part 1: The Basics and Backstory

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How much is money worth? If taken literally, the reply to that question is determined by myriad factors too large in number to catalog here. Taken more existentially, the answer can partly be found in the way an individual invests. The intentional pursuit of certain financial opportunities may attract monetary growth and a greater understanding of the consumer’s role in a labyrinthine economy. But to transform the goals perhaps jotted down on a loose sheet of paper into the more functional, green paper so necessary for living demands time and sizable attention. (Incidentally, United States currency paper is made of cotton and linen.)

Time, at least, is a resource we seem to have a little more of. In 1960, the average life expectancy for the total United States population was 69.7 years. Compare that to 79.4 years as of 2015, marking a near ten-year increase. Due partially to global events, that number has dipped to a still respectable 76.4 years as of 2021.¹ The most current number, nevertheless, helps create a larger canvas on which to render a path to that metaphorical pot of gold.

Retirement Revised

We are now living longer than our parents and grandparents. Older adults are working beyond retirement age, choosing more months at a bustling office or working in a literal field somewhere. These older Americans continue to find their jobs as thrilling as they did decades ago. The allure shines on. By retaining employment, they might want to keep their minds active or be regularly challenged in the ways they always have. But that may not be the case for every person. Some wish to do something else with the money they have worked strenuously to earn and conserve. The very notion of lounging at a tropical beach with genuinely blue water excites and draws them to the sands.

How you spend your later years is up to you. Most of our initial concerns can be distilled though. Once the haziness clears, it becomes about research, control, and answering the flickering, neon sign question: With so many additional days, what shall you do with additional dollars? But it takes good investing to generate said additional dollars. That’s why thorough planning for retirement is imperative. As with many areas of life, the trick is preemptive action. Annuities may just be the viable investment option you seek, one that can support a pleasant future however it looks for you.

The Definition

Essentially, an annuity is a contract between a contract holder and an insurance company wherein money is put into an account; then the contract holder or annuitant has the option to receive regular payments either immediately or in the future. Immediate and deferred annuities are the two most common types of annuities. Western United Life Assurance Company, a ManhattanLife company, currently offers two kinds of deferred annuities, which are fixed-indexed annuities and multi-year guaranteed annuities. Each of these involves accumulation, guarantees, and protection. Part II of this blog series will delve deeper into today’s annuities and specifically, the benefits of ManhattanLife annuity products.

Moving Ahead with History

Before we fully examine current annuity products, let’s take a glance at the annuity’s past and start with the language that characterizes it. ‘Insurance’ is a very oversized umbrella of a term that is multifaceted, with countless terms beneath, each possessing an extensive history of their own. Annuities are part of this insurance vocabulary. The word has far-reaching roots in antiquity, with some of our ancestors employing annuity concepts to keep their budgets in proper and pristine order. Take for instance, Ancient Egypt. In his text, The Early History of the Annuity, author Edwin W. Koff notes the use of annuities between 1100 and 1700 B.C. He also states that archeological studies show an annuity was purchased by Hepd'efal, a prince that ruled in the Middle Empire. Fast forward thousands of years and Henry I is using a similar idea in England during his rule in 1103 A.D. when he "secured the use of 1,000 men and three horses in return for a yearly payment of 400 marks to the Counts of Flanders". ²

As education evolved and society changed dramatically, so too did the handling of money and financial systems. A sophistication of sorts, thankfully, emerged. In 1705, the Amicable Society for Perpetual Assurances was established, as Koff states. This organization was incorporated by Royal Charter the following year. The idea was to raise a fixed contribution from each member and from those proceeds, give out a particular sum each year to the representatives of those that passed away during the year. Each member of the organization had to pay the same contribution and no one under the age of 12 or above the age of 55 was admitted.³

Annuities eventually became less limited to untouchable royalty or powerful individuals and those assisting them, while some of these people’s practices migrated to America's shores. Their methods were significantly taken over by insurance organizations that could provide multiple investment options, more specific criteria, and a potentially better benefit for individuals from all backgrounds and occupations. Still, the beginnings of such organizations were humble.

As author Marquis James notes in The Metropolitan Life: A Study in Business Growth, a nascent, late 18th century Pennsylvania chartered the Corporation for the Relief of Poor and Distressed Presbyterian Ministers and Distressed Widows and Children of Ministers. As you will gather from its descriptive title, this corporation offered survivor annuities to the families of ministers. Several years after, in 1812, the Pennsylvania Company for Insurance on Lives on Granting Annuities was established, extending contracts to a wider segment of the population.⁴ By the early 1900s, the number of multigenerational households across the nation began to fall, heralding a rising need for annuities. The Great Depression helped spawn an even greater interest in alternatives to saving for retirement. With the creation of TIAA-CREF in 1952, the first group variable deferred annuity was offered, supporting further evolution of annuities in the United States.⁵

Western United Life Assurance Company issued its first annuity contract twenty-six years later in 1978. The ManhattanLife company continues to offer excellent ways to help invest in your future. Read on to discover even more about our annuities in Aspects of Annuities, Part 2: Our Products and the Pursuit of New Heights.

Works Cited:

1. Medina, Lauren D., Shannon Sabo, and Jonathan Vespa, “Living Longer: Historical and Projected Life Expectancy in the United States, 1960 to 2060,” P25-1145, Current Population Reports, P25-1145, U.S. Census Bureau, Washington, DC, 2020

2. Koff, Edwin W. The Early History of the Annuity. L.W. Lawrence.1927.

3. Koff, Edwin W. The Early History of the Annuity. L.W. Lawrence.1927.

4. Marquis, James. The Metropolitan Life: A Study in Business Growth. Viking Press. 1947.

5. Pechter, Kerry. Annuities for Dummies. Hoboken, John Wiley & Sons, Inc., 2008.


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