A new Gallup survey finds more middle-class Americans are utilizing annuities to accumulate retirement income.
The 2022 Survey of Owners or Individual Annuity Contracts, commissioned by Greenwald Research and the Committee of Annuity Insurers, reports that 81% of 950 annuity owners say collecting sufficient income for retirement is a main driver as to why they’ve kept their annuity, and 93% believe they have done “a very good job” of saving for retirement.
Eighty-eight percent believe that owning annuities is a “good way” of ensuring their surviving spouse has continued income, while 84% say that the idea of receiving guaranteed payments for the rest of their lives was a main driver in purchasing an annuity. Another 84% add that annuities are an important source of their retirement security.
“About nine in 10 owners hope to use their individual annuities to gain peace of mind during retirement,” says Matthew Greenwald, founder of Greenwald Research, in a statement. “More specifically, they hope to use their annuities to protect against longevity risk, to protect against investment losses, and to avoid being a financial burden on their children, among other important uses in retirement.”
As a result, 93% of annuity owners say they are confident in their retirement preparedness and 74% see their annuities as a financial cushion in the case that they or their spouse live beyond life expectancy. Seventy-nine percent also view annuities as an effective way to protect against the costs of catastrophic illness or nursing home care during retirement.
More than eight in 10 owners (81%) cite the tax treatment of individual annuities as important to their savings decision, and 69% say this feature has allowed them to set aside more retirement savings. Nine in 10 say they try not to withdraw from their annuities before retirement to avoid paying extra taxes.
The survey also found that middle-class Americans were the likeliest to take out an annuity: over 11 prior surveys conducted in the past three years, individual annuity owners were consistently middle-class, bringing in a median annual household income of $79,000, reports the research.
The research comes as annuity sales jump 27% in the first half of 2023, reported LIMRA in its recent findings. According to LIMRA’s Second Quarter 2023 Annuities Industry Estimates, total U.S. annuity sales increased to $181.1 billion for the first six months of the year.
“In the second quarter, registered indexed-linked and fixed indexed annuity sales set records as investors seek solutions that offer greater upside growth potential while maintaining some level of downside protection, said Todd Giesing, assistant vice president of LIMRA Annuity research, in a statement at the time. “LIMRA is forecasting a strong second half of the year and expects 2023 sales to potentially surpass the record sales set in 2022.”
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