Principal® Adds New Annuity With Guaranteed Lifetime Income Option

Rhea-AI Summary

Principal Financial Group has introduced Principal Strategic Income, a new Registered Index-Linked Annuity (RILA) designed to provide guaranteed lifetime income for retirees. The product comes amid a growing demand for annuities, driven by an aging U.S. population, volatile markets, and rising inflation. The Secure Income Protector rider offers two income options: a fixed annual amount or a tiered amount that adjusts based on account value. The annuity allows for a one-time change in income options before withdrawals begin. It is available through financial professionals and aims to help retirees manage their savings and ensure stable income regardless of market performance.

Positive

• Introduction of Principal Strategic Income amid rising demand for annuities.
• Guaranteed lifetime income through Secure Income Protector rider.
• Two income options offering flexibility for retirees.
• Allows a one-time change in income options before withdrawals.

Negative

• Investment involves risk, including potential loss of principal.
• Excess withdrawals could lower income payments.

Insights

Financial Analyst

The introduction of Principal® Strategic Income, a new annuity product, is noteworthy for several reasons. First, it addresses a significant market need driven by the aging population in the U.S., with more Americans reaching retirement age and seeking reliable income streams. The product's guaranteed lifetime withdrawal benefit is particularly attractive, as it ensures a steady income regardless of market performance or longevity.

From a financial perspective, this product provides an opportunity for Principal Financial Group® to capitalize on the increasing demand for secure retirement income solutions. The Secure Income Protector rider, with its two income options, offers flexibility and lower costs compared to many traditional variable annuities. This could attract a broad range of investors, boosting sales and enhancing Principal's market position.

However, it is essential to consider the risks associated with index-linked deferred annuities. These are complex financial instruments and investors must be aware of the potential for substantial loss of principal and earnings, especially with early withdrawals. As such, the product may not be suitable for all investors, particularly those who are risk-averse or have a shorter investment horizon.

In the short term, this product could lead to an increase in sales and customer acquisition for Principal. In the long term, its success will depend on the overall market performance and the company's ability to effectively manage and mitigate associated risks.

Market Research Analyst

The launch of Principal® Strategic Income is strategically aligned with current market demographics. With a projected 30.3% increase in the number of Americans aged 65 or older by 2030, the demand for retirement income solutions is growing. This product's introduction is timely and responds directly to the shifting priorities of this age group, which is moving from accumulating assets to seeking guaranteed income.

The flexibility offered by the Secure Income Protector rider, allowing a change in income option before withdrawals begin, is a important selling point. This feature can appeal to retirees who value adaptability as their financial needs evolve.

From a market perspective, the product could capture a significant share of the annuity market, which has seen record sales in recent times. The innovative design of the Principal® Strategic Income puts it in a strong position to compete against existing products.

One potential drawback is the product's complexity. The need for careful consideration of investment objectives, risks, charges and expenses means that it will require extensive education and support from financial professionals. Therefore, the success of this product will also depend on the effectiveness of Principal's marketing and educational efforts.

An investor should watch for adoption rates and customer feedback as indicators of the product's traction in the market.

DES MOINES, Iowa--(BUSINESS WIRE)-- With the number of people in the United States aged 65 years and older on the rise, Principal Financial Group^® has launched its second Registered Index-Linked Annuity (RILA), Principal^® Strategic Income, that helps individuals nearing or in retirement create guaranteed lifetime income while still building and protecting their retirement savings.

“A convergence of factors has accelerated the demand for annuities and heightened the need for guaranteed income in retirement,” said Sri Reddy, senior vice president for Retirement and Income Solutions at Principal. “Recent macroeconomic trends – including higher interest rates, volatile equity markets, and inflation – coupled with a growing aging population with longer life expectancies mean Americans need more ways to save and invest to meet their needs in retirement. But the record wave of people turning 65 years of age every day has created a market for annuity solutions that is significantly greater than we have seen in the past, magnifying how important they can be to investors during their peak planning stages.”

Principal^® Strategic Income, which is available to investors through financial professionals, builds on the first RILA Principal debuted in 2023 when annuity sales hit all-time highs¹. The new RILA uses a guaranteed lifetime withdrawal benefit, the Secure Income Protector rider, to ensure individuals have a secure source of income in retirement regardless of future investment market performance or how long they live. For a lower cost than some traditional variable annuities with income riders, the Secure Income Protector rider offers two income options:

1) A level amount every year that never decreases.
2) A tiered amount that provides higher income initially and then decreases if the account value reaches zero.

Unlike many variable annuities with income riders that lock in a decision at contract issuance, Principal^® Strategic Income allows individuals to change their income option one time before they start taking income payments, providing flexibility should income needs change before their first withdrawal.

The increase in demand for annuities can be correlated to the aging U.S. population with more than 73 million Americans reaching age 65 or older by 2030 – a 30.3% increase over 2020². This age demographic has reached a financial milestone at which their priority has shifted from saving for retirement to converting assets into lifetime income. In fact, a survey Principal conducted in March found creating income in retirement was the top personalized financial advice service employees would use through their employer’s retirement savings plan.³

Principal^® Strategic Income may not be available in all states or with all broker-dealers.

Principal^® Strategic Income does not directly participate in any stock, equity investments, or index. It is not possible to invest directly in an index.

Investing involves risk, including the possible loss of principal.

Before investing in registered index-linked annuities, investors should carefully consider the investment objectives, risks, charges, and expenses of the contract and underlying investment options. This and other information is contained in the free prospectus, which can be obtained from your local representative or online at principal.com. Please read the prospectus and, if available, the summary prospectus carefully before investing.

Index-linked deferred annuity contracts are complex insurance and investment vehicles. This contract is a security and there is a risk of substantial loss of principal and earnings. The risk of loss may be greater when early withdrawals are taken due to any charges and adjustments applied to such withdrawals. These charges and adjustments may result in loss even when the value of a segment option has increased. Clients should consult with a financial professional about the appropriateness of this product based on their financial situation and objectives.

Contract rider descriptions are not intended to cover all restrictions, conditions or limitations. Refer to rider for full details.

Guarantees are based on the claims-paying ability of Principal Life Insurance Company^®.

Excess withdrawals could lower your income payment.

About Principal Financial Group^®

Principal Financial Group^® (Nasdaq: PFG) is a global financial company with nearly 20,000 employees⁴ passionate about improving the wealth and well-being of people and businesses. In business for 145 years, we’re helping approximately 62 million customers⁵ plan, protect, invest, and retire, while working to support the communities where we do business, and build a diverse, inclusive workforce. Principal^® is proud to be recognized as one of the 2024 World’s Most Ethical Companies^® by Ethisphere⁶, a member of the Bloomberg Gender Equality Index, and a “Best Place to Work in Money Management⁷.” Learn more about Principal and our commitment to building a better future at principal.com.

Annuities products and services are offered through Principal Life Insurance Company^®. Securities offered through Principal Securities, Inc., member SIPC and/or independent broker/dealers. Referenced companies are members of the Principal Financial Group^®, Des Moines, IA 50392.​

Any other entities mentioned within are not affiliated with any member companies of Principal Financial Group.

© 2024 Principal Financial Services, Inc. Principal^®, Principal Financial Group^®, and Principal and the logomark design are registered trademarks of Principal Financial Services, Inc., a Principal Financial Group company, in the United States and are trademarks and services marks of Principal Financial Services, Inc., in various countries around the world.

¹ LIMRA 2023 Individual Annuity Sales Survey
² U.S. Census Bureau
³ Principal Insights Community Survey, March 2024
⁴ As of March 31, 2024
⁵ As of March 31, 2024
⁶ Ethisphere, 2024
⁷ Pensions & Investments, 2023

View source version on businesswire.com: https://www.businesswire.com/news/home/20240710072839/en/

Phillip Nicolino, 515-362-0239, nicolino.phillip@principal.com

Source: Principal Financial Group

FAQ

What is Principal Strategic Income?

Principal Strategic Income is a Registered Index-Linked Annuity (RILA) offering guaranteed lifetime income, designed for retirees.

What does the Secure Income Protector rider offer?

It offers two income options: a fixed annual amount or a tiered amount that adjusts based on account value.

Who can invest in Principal Strategic Income?

It is available to investors through financial professionals.

What are the risks involved with Principal Strategic Income?

Risks include potential loss of principal and lower income payments due to excess withdrawals.

Can you change income options with Principal Strategic Income?

Yes, individuals can change their income option one time before starting withdrawals.

Why is there a growing demand for annuities like Principal Strategic Income?

The demand is driven by an aging U.S. population, volatile markets, and rising inflation.