Overcoming the Annuity Disconnect

Many consumers have contradictory opinions when it comes to annuities.  They desire the benefits provided by annuities but may say that they don’t actually like annuity products.  In the article “Conflicting Views On Annuities Spell Opportunity,” Annuity News’ Linda Koco discusses the disconnects that often exist when it comes to annuity products.  The Phoenix Companies recently performed a survey to find out where the annuity disconnect lies.  Seventy-one percent of those surveyed said that they would consider buying an annuity for a predictable source of retirement income, to leave behind death benefits and/or to pay for chronic health care costs.  Although the majority of the 1,000 people surveyed said that they would like the benefits provided by annuities, most of them don’t know much about the products themselves.  More than half said they were not familiar with annuities, while 32% said that they were only “somewhat familiar”.  One-quarter of those surveyed said that they would not purchase an annuity.

The researchers then asked how consumers plan to create an income stream in retirement.  More than half plan to use their savings as a supplement to social security and pension income.  Fifty percent said that they would make either monthly or yearly withdrawals from 401k plans or IRAs.  This type of planning can be risky because there are no guarantees that you will not outlive your savings.  Your money also might be subject to large losses in the markets depending on your specific exposure.  Even though half of those surveyed said they would consider an annuity for retirement income, only 20% have a set plan to use an annuity to create a lifetime stream of income.  Annuities are the only way to guarantee a lifetime stream of income, so there is a need for more information to be relayed to consumers about the importance of using annuities in retirement planning.  Consulting a professional when it comes to retirement planning is important.  Only 36% of consumers had spoken with a professional.  But when people speak with an expert, 85% of them are confident that they will be able to convert their retirement savings into an income stream for their future.

The annuity disconnect really creates an opportunity for annuity professionals to spread the word about annuities and their benefits.  It’s important for consumers to understand that annuities have been modernized with adaptations that meet current consumer needs.  Annuities are not always annuitized in order to receive benefits.  New benefits include accumulation, asset protection, retirement income, death benefits, and personal care benefits.  A financial professional can help you find an annuity that meets your specific needs.  A lot of retirement savings are invested in securities, which can provide a false sense of security.  Even withdrawal rates as low as 4% per year might not sustain savings through one’s retirement.  Annuities help to eliminate longevity risk and take away a lot of the worries about retirement.  Speak with an expert to determine if an annuity is right for your personal retirement plan.  Only 1/4 of those in the middle income market have spoken with a financial professional.  They could benefit from the safety and security of annuities.

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