Annuity Purchases Rise

There are two reasons for an increase in annuity purchases, according to Mark Huffman of Consumer Affairs.  His article “Should You Consider An Annuity?” says that the stock market collapse in 2008-2009 led many people to annuities.  After losing a significant chunk of their investments, investors sought products with less risk and more guarantees.  Annuity products are still meeting those needs, especially for risk-averse investors.  The retiring Baby Boomer generation is the second reason annuity purchases have been on the rise.  As Baby Boomers age, they are looking for stable income sources, especially if their retirement portfolios aren’t all they hoped.  401k annuity transfers allow Baby Boomers to take their work savings and guarantee a lifetime stream of income off which they can pay basic living expenses.

Investors have the choice of fixed annuities, variable annuities, and even an equity indexed annuity.  You also choose whether you would like your annuity payments to be deferred or begin immediately.  The length of time you’ll receive payments can be for a fixed time frame such as twenty years, over your lifetime, or in the case of a death benefit annuity they can last as long as your spouse’s lifetime.  You are usually guaranteed a certain minimum return by the insurance company issuing your annuity.  Since they are taking on the risk that investors want to avoid, the rate of return may be lower than some other products.  But the popularity of annuities has brought some good competition to the marketplace as well.  For those investors who annuities work well for, their payments will be based on their initial investment, the age at which they receive payments, and their rate of return.

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