TIAA-CREF conducted a survey earlier this year of 1,000 Americans called the 2015 Lifetime Income Survey. Insurance News Net’s Linda Koco summarized the recently released findings in the article “People Want Lifetime Income But Don’t Know Annuities.” Having guaranteed monthly income in retirement is important to 84% of those surveyed, but only 14% have bought an annuity to secure that income. Aside from a pension, which most people don’t have, and Social Security, which is rarely enough to cover the bills, annuities are the only way to create a lifetime income stream from your retirement savings. Of those surveyed, 62% had not even looked into how they can transfer their savings into an income stream. Close to half of Americans are worried that they will run out of money during their retirement and 49% said that they would consider putting money into an annuity that will provide monthly income. But 65% of people are not familiar with annuities and only 28% of those surveyed actually have a favorable impression of annuity products.
These survey results appear to be bad news for the annuity industry, but Koco says that they are only half of the story. Overall annuity sales increased by 3% in 2014, according to LIMRA SRI. Sales of annuity products that guarantee lifetime income streams actually increased by double digits. Immediate income annuity sales went up 17% and deferred income annuity sales increased 22% to $2.7 billion. It’s still a small percentage of overall annuity sales, but the increases in the deferred income annuity market since they’ve been around the past couple of years point to a strong importance in the industry. Fixed indexed annuity sales also saw a large increase last year of 23%. Most of these products are sold with a guaranteed lifetime withdrawal benefit (GLWB). This ensures that you continue to receive lifetime income payments even if your premium amount has all been paid out. It seems confusing that annuity sales are increasing even though TIAA-CREF found that most Americans are not aware of these products or don’t have a good impression of them.
But this actually points to a great opportunity for the annuity industry as a whole. Those creating and selling annuity products must do some work to increase consumer understanding of the benefits of annuities. Annuities are often unknown to consumers, or worse yet, misunderstood. TIAA-CREF points out that annuities are the only way to create a guaranteed lifetime stream of income aside from those mentioned earlier that are not foolproof. People who have annuity products have less anxiety about retirement because they know they have guaranteed income that they cannot outlive. It’s important to include a source of lifetime income in any retirement planning discussions. While the survey results showed that Americans have a long way to go when it comes to retirement readiness and understanding, we have still come a long way from the past. In 2014, 34% of those surveyed said that their top goal in retirement would be finding guaranteed income to cover their living expenses. That number increased to 48% this year. Although only 26% of younger adults aged 18-34 know about annuities, almost half of those aged 55-64 have annuity awareness. The annuity industry has seen increasing sales in the past year, but they need to work on improving education so that the large amount of unaware Americans know the annuity benefits that go hand in hand with their retirement goals.