Insurance companies and financial advisors are pleased that the Government Accountability Office is recommending immediate annuities to middle income families, but they don’t think that a huge sales boom is going to happen overnight. According to Darla Mercado’s Investment News article, “Financial advisers, insurers hail GAO plug for immediate annuities,” the GAO is admitting that Social Security is flawed and retirees need to have added income to finance their retirement. Despite the fact that immediate annuity rates are still not at an ideal level because of the financial markets, immediate annuities are still selling well and helping millions finance their retirement. Sales of $7.6 billion in 2010 were just slightly above the sales of $7.5 billion in 2009. A steady increase is likely to continue, especially after the GAO support.
LIMRA International expects immediate annuity sales to be around $13 billion within five years. A big part of the increase can be attributed to immediate annuities being marketed through more distribution channels, including banks, wirehouses, and more broker-dealers. The GAO support could help raise awareness of immediate annuities and increase sales as well. One advisor points out that it is more important for investors to protect their money than it is to grow it, even though both are very important. Along with recommending single premium immediate annuities to clients, he is also a fan of a deferred fixed annuity with inflation adjustment. The government is also working with retirement plan sponsors on getting annuities included in more plans as a payout option and putting annuity payout information on plan statements.