A recent LIMRA study showed that 35% of retirees generate retirement income from annuities, but the investments only account for 4% of household income in retirement. Most people still use social security and pensions to cover their living expenses in retirement. But with social security’s future in question and traditional pensions making way for 401ks, LIMRA expects both the number of people purchasing annuities and the amount they contribute to household income to increase. This information comes from the Financial Planning article “LIMRA Study: Retiree Reliance on Annuities is Small, but Growing” by Dave Lindorff.
Those interviewed had minimum incomes of $35,000, were aged 55 to 79, have been retired a year or more, and do not work at all to bring in income. The guaranteed income is by far the most popular benefit and reason for buying annuities. Guaranteed income benefits were prevalent in 40% of the annuities owned by interview respondents. Around 20% of those who have annuities chose immediate annuities, according to the survey. The best immediate annuities for this 20% varied, while the rest of the respondents carried deferred annuities.
Income was not much of a determining factor as to who purchased annuities. Around one-third of households seemed to own an annuity product in the group with incomes under $75,000. Those with incomes over $75,000 only had about 5% more annuities owned. The main difference in who owns annuities was related to the amount of household assets. Households with assets below $100,000 only owned annuities 22% of the time. For households with assets between $250,000 and $499,000, 45% had annuity income. And 40% of those with assets greater than $500,000 use an annuity to help finance their retirement. LIMRA only expects those numbers to grow.
Written by Rachel Summit
