Any retirement planning product line that sees a major boost in utilization over a five-year period is sure to attract some attention.
Perhaps it will be the case if a new forecast from the LIMRA Secure Retirement Institute (LIMRA SRI) comes to fruition.
Income-focused annuity product sales are predicted to grow 10%-15%, while immediate income products are expected to increase 15%-20% by 2023.
Additionally, LIMRA SRI predicts accumulation-focused annuity product sales will grow at a much faster pace—a hefty 30%-35% over the same period.
According to LIMRA SRI research, less than a third of Boomers aged 60 and under have access to a pension.
Given this, the research found guaranteed retirement income solutions should be growing as these pre-retirees begin to think about supplementing the income they receive through Social Security.
However, LIMRA SRI data show income-focused annuity product sales have remained lower than accumulation-focused annuity products.
Around $30 billion was paid out in guaranteed income last year through annuities. With more than 10,000 Americans turning 65 each day, LIMRA SRI estimates the demand for retirement income products will expand to nearly $32 trillion by 2026.
Why indexed annuities are booming
Indexed annuities represented less than 10% of the overall annuity market in 2007, but grew to represent about 30% of the market by 2017.
Fixed annuities were the main driver of overall annuity sales growth in 2018, which were up 15% compared to 2017, thanks in part to the Department of Labor’s fiduciary rule being vacated part way through the year. LIMRA SRI says the growth was fueled by indexed annuity sales reaching nearly $70 billion, which is over $10 billion higher than the prior record growth.
“Last year was a bounce-back year for annuities,” said Todd Giesing, director, Annuity Research, LIMRA SRI, in the latest episode of LIMRA Unplugged. “We saw all annuity product lines experience growth. Variable annuities experienced growth for the first time in six years, but it really was fixed annuities that were the main driver of growth.”
Looking ahead, fixed annuities will remain in the spotlight, with indexed annuities positioned for significant growth in the next five years.
“When we take a look at the indexed annuity market, the products themselves have some key features that individuals are looking for in retirement,” Giesing said, pointing to principal protection, the potential for higher returns than traditional fixed solutions, as well as optional guaranteed lifetime income solutions as features boosting popularity.
“Now with these key features, indexed annuities have broadened their appeal, not only to individuals who are nearing or entering retirement, but to advisors as well, as they are another option for helping individuals with their retirement plan,” Giesing said.
When you look at who’s buying indexed annuities, Giesing said a majority are being purchased by individuals who are between 56-70 that are looking for downside protection, guaranteed income or a combination of both in their retirement portfolio.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
