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With workers of all stripes attempting to shore up their retirement plans and advisors looking to oblige those efforts, annuities have been experiencing a rebirth over the past several years. That is to say these products are as popular as they’ve ever been as highlighted by record sales in 2023. More of the same is expected this year.
Other data points confirm clients’ rising interest in annuities, indicating advisors need to be ready. Clients are apt to be inquisitive about annuities even after purchase. According to a recent Nationwide Annuity survey, 84% of those queried said they turn to advisors with questions.
As advisors know, there are more big reasons why annuities are “having a moment.” The thousands of baby boomers retiring every day coupled with concerns about outliving retirement savings has thrust annuities back into the spotlight. However, it’s not just boomers that are responsible for the annuities renaissance. Gen X, which is next up to hit retirement age, is worried they won’t be able to enjoy retirement comfort on par with their parents and thus are considering annuities.
Put it all together and it’s clear now is an appropriate time for advisors to shore up their annuities toolkits.
Understanding Clients’ Annuities Motivations
With clients, understanding the “why” is always important and relevant and that’s applicable to annuities. A new BlackRock survey delves into detail about the motivations behind surging interest in annuities. Longer lifespans and the desire for consistent lifetime income are among the principal factors.
“It’s the #1 financial fear: Outliving your money. 97% of annuity owners say their annuities help them worry less about running out. But retirees have immediate financial responsibilities on their mind, too—and 93% say having an annuity helps them worry less about day-to-day expenses,” observes BlackRock.
It should be noted that the survey is of 1,000 annuity owners ages 60 and above – statistics bolstering the credibility of the findings. Those findings also include the point that many clients crave security and that enhances the likelihood of discussing annuities with advisors.
“The biggest concerns for annuity owners mirror those of all Americans these days: The rising cost of living due to inflation (57%) and the related rising cost of health care (56%),” adds BlackRock. “There’s also significant worry about the potential reduction of government benefits, such as Social Security (50%) and Medicare (49%).”
More Factors Behind Fresh Annuities Interest
As noted above, security is one the big reasons why clients are interested in annuities. Related to that is eradicating feelings of vulnerability. Even if they’ve been diligent savings, some clients can’t help but feel there are gaps in their retirement plans. Annuities can plug those holes.
Likewise, as BlackRock notes, annuities can act as safeguards and preventative measures when it comes to financial fraud – something to keep in mind when considering seniors are prime targets for those types of crimes.
Then there’s the peace of that comes along with steadiness, or knowing that monthly is income there because of an annuity.
“Retirees do not like spending down their nest eggs,” concludes BlackRock. “Annuities help ease those spending fears, say our survey participants. 53% say that owning one makes them feel more comfortable spending non-guaranteed assets if there’s something they want or need to spend money on, and 61% of annuity owners are very or extremely confident they can withdraw sustainably through retirement.”
Related: Rising Longevity: A New Challenge for Advisors and Clients