Annuity features are steadily rising, as life insurance companies paid out billions of dollars in the benefits in 2023.
New data from a 2024 Life Insurers Fact Book by the American Council of Life Insurers (ACLI) shows that insurance companies disbursed $104 billion in annuity benefits last year, the most ever recorded and a 9% increase compared to 2022.
The research found that a greater number of workers and retirees are also adding their savings to annuity features. According to the ACLI, premiums paid by annuity owners in 2023 totaled $361 billion, a 3% rise compared to last year.
ACLI President and CEO David Chavern notes that recent economic uncertainty, which has carried rising costs and inflation, have prompted retirees to buy guaranteed lifetime income features.
As the rate of pensions decline today and as Social Security benefits tighten, more savers are leaning towards purchasing annuity benefits that could provide income streams for life.
“In this era of economic uncertainty, life insurers are bringing financial certainty to retirees. Regardless of how long you live, a lifetime annuity keeps paying, supplementing Social Security and helping reduce reliance on government for financial assistance,” said Chavern.
The data comes out as a recent study by researchers Mark Warshawsky and Gaobo Pang argues that a full or partial annuitization of 401(k) and individual retirement account (IRA) savings could lead to ideal retirement outcomes over the traditional 4% rule.
Rather than withdrawing 4% of their savings, the study reasoned that a strategy of systematic withdrawals, including more liquid investments or cash savings and combined with annuities, could outperform other approaches for those retiring with $250,000 or more in savings. This could either occur through the purchase of an immediate annuity or a gradual, laddered process of annuitization.
Those retiring with less than $250,000 would see a higher income by annuitizing greater portions of their savings, Warshawsky and Pang reported in the findings.
SEE ALSO:
Full or Partial Annuitization May Create Better Retirement Outcomes
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
