Record numbers of retirees and savers are flocking to fixed and fixed index annuities – why?
For many baby boomers , the great recession is still ingrained into their thoughts as they make plans for their retirement. The thought of losing 30-40% or more of their portfolio in the stock market has sent them out seeking safer growth options; while other baby boomers seek the safeguard of knowing that they will have lifetime **guarantees for their foundational income in retirement.
The insurance industry is on pace to issue $100,000,000,000.00 (that’s one hundred billion dollars) in just fixed and fixed index annuities this year alone! With banks offering safe money rates that hover just over zero, we should not be surprised by the number of people flocking into contractually **guaranteed growth and income options. However, this is most likely not the only reason for this level of annuity sales growth. Annuities have traditionally paid better rates than the banks so the growth of sales should not be based upon higher interest rates alone. [continued below video…]
Video: Annuity Guys, Dick & Eric, discuss why it seems like everyone wants a “hybrid” Fixed Index Annuity!
Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. During this segment, Dick and Eric are referring to Fixed Annuities unless otherwise specified.
According to AARP, about 8000 people will turn 65 everyday from now until 2029. These baby boomers have seen one of the greatest bull markets of all time during the eighties and nineties followed by substantial market volatility and more recently a “lost decade” of market gains. They appear to be interested in preserving their wealth and income in retirement and many are willing to give up some of the market’s upside potential to protect against market backslides. There may not be empirical evidence to support the fact that retirees are valuing the **guarantees that annuities offer, but the dollars seem to be speaking loudly that boomers believe that annuities are a good option for retirement planning.
Is now the right time to join the crowd moving a portion of one’s savings into fixed or hybrid fixed index annuities? It depends – do you feel the need to protect retirement dollars from losses resulting from the next big correction in the equities market? Do you want a predictable, stable income stream that you cannot outlive? Do you wish you had your parents company sponsored pension plan? Does the fear of outliving or losing your money keep you up at night? If you answered yes to any of these questions, you may want to join the millions of satisfied annuity owners who value the way these financial products secure their retirement.
The inspiration for this weeks entry came from our friends at the Insured Retirement Institute.
IRI Second-Quarter 2014 Annuity Sales Report: Industry-Wide Sales at Highest Level in Three Years
Indexed Annuities Power Fixed Annuity Sales to Five-Year High; Variable Annuity Sales Up from First Quarter
WASHINGTON, D.C. – The Insured Retirement Institute (IRI) today announced final second-quarter 2014 sales results for the U.S. annuity industry, based on data reported by Beacon Research and Morningstar, Inc. Reaching the highest mark in three years, industry-wide annuity sales in the second quarter of 2014 rose to $59.9 billion, a 6.8 percent increase from $56.1 billion in the previous quarter and a 9.9 percent increase from $54.5 billion in the second quarter of 2013.
Fixed annuity sales – supported by record fixed indexed annuity sales – increased to $24.3 billion in the second quarter of 2014, according to Beacon Research. This was a 7.6 percent increase from $22.6 billion in the previous quarter and a 41.6 percent increase from $17.1 billion in the second quarter of 2013. Variable annuity total sales reached $35.6 billion in the second quarter of 2014, according to Morningstar. This was a 6.2 percent increase from $33.5 billion in the first quarter of 2014, but a 4.6 percent decline from $37.3 billion in the second quarter of 2013.
“These are the highest industry-wide sales we’ve seen in three years, and on the fixed side of the market, the highest in five years,” said Cathy Weatherford, IRI President and CEO. “We continue to see moderate growth, driven by consumer need for protection and income, in all types of retirement income products, and more robust growth in certain products based on the macroeconomic conditions of the day. For example, the market is currently experiencing a surge in the sale of fixed indexed annuities that – in addition to offering upside potential with downside protection and access to **guaranteed lifetime income – can be used by consumers as an alternative to traditional fixed income investments without the interest rate risk.”
According to Beacon Research, continued growth in fixed annuity sales were largely supported by a surge in fixed indexed annuity sales, which hit a new quarterly record of $12.9 billion in the second quarter of 2014. This represents a 14.8 percent increase from first-quarter 2014 sales of $11.2 billion and a 41.5 percent increase from second-quarter 2013 sales of $9.1 billion. Income annuity sales also rose during the second quarter of 2014, topping $3.39 billion – a 3.2 percent increase from nearly $3.29 billion in the previous quarter and a 32.7 percent jump from $2.56 billion in the second quarter of 2013. For the entire fixed annuity market, there were approximately $12.5 billion in qualified sales and $11.8 billion in non-qualified sales during the second quarter of 2014. [Read More…]