It’s almost time for the third quarter annuity sales figures to be released. The industry is expecting more of what we saw in the second quarter and entire first half of this year. This year has seen a lot of “Positive economic news for fixed annuities,” according to LifeHealthPro’s Ken Nuss. Total annuity sales reached their highest level in three years during the second quarter. The Insured Retirement Institute also found that sales of fixed annuities reached their highest level in five years. There is more than one reason why annuities, particularly fixed annuities, are seeing an increase in sales.
Although interest rates are not historically high, they are strong right now compared to alternative products offering guarantees and principal protection. The increasing number of Baby Boomers nearing retirement age is another factor leading to increasing fixed annuity sales. These Baby Boomers are trying to turn their lifetime of retirement savings into guaranteed lifetime income to take the financial worry out their future. Steady interest rates and a large number of Baby Boomers retiring are two reasons that all types of fixed annuities are seeing sales increases.
Total annuity sales in the second quarter were up close to 7% from the first quarter and almost 10% from the year before. When it comes to fixed annuities, sales increased more than 41% from the second quarter of 2013. The largest contributor to this sales increase was fixed indexed annuity products. These annuities had sales of $12.9 billion during the second quarter. Fixed indexed annuities are popular because they offer the guarantees of traditional fixed annuity products, but have the potential for greater gains. Investors get to capitalize on bull markets because their gains are tied to a stock market index. In order to maintain all of the guarantees and protection of a fixed annuity, returns are often capped and tied to a participation rate as well.
In the past few years, there has been significant growth in all products that help consumers get retirement income. But no other product has seen the growth and increasing sales of fixed annuities. Fixed annuities provide guaranteed lifetime income, protection from market downturns and the potential to take advantage of market increases. The current state of the economy has made these fixed annuity benefits even more desirable. Consumers seek trustworthy products and will lower their stress and financial risk in retirement. Fixed annuities offer insurance against some of the biggest retirement concerns. They also offer the option of adding many different riders to cater to your personal financial needs.