According to a recent article in PLANSPONSOR magazine, research has shown that individuals who are most likely to be interested in annuities are those who are younger and still working. The study, conducted by LIMRA Secure Retirement Institute (LIMRA SRI), was aimed at learning more about the consumers who were debating the purchase of an annuity but decided not to in the end.
42% of participants claim they were open to the idea of annuities, and consider them good products. They even went as far as to say they would potentially purchase one down the road. For this group (44%), the top reason given for walking away from an annuity product was that it wasn’t the right time. Nearly ⅔ of this segment is not retired and only approximately 33% of the non-retirees plan to retire in the next 10 years. Additionally within this group of consumers, 61% claim that having enough money to last through retirement is their single most important objective for their assets.
On the flipside, 18% of those who did not buy an annuity said they would likely never own one. About half of this group is already retired and 33% plan to retire in the next four years. This group also gave the highest importance on control over how investments are managed when asked about priorities and most have guaranteed income through pensions, a luxury not available to many younger workers.
Many defined contribution plan sponsors have been hesitant to offer annuities as an investment option to group participants with many believing the take-up rate by employees would be low. Additionally, many want a better safe harbor for selecting an annuity provider that would protect them from fiduciary liability.
LIMRA SRI also pointed out that prior research has shown annuity owners feel more confident in retirement that they will be able to afford their preferred lifestyles, even if they live to the age of 90 (or older). In fact, 73% of retirees who own an annuity believe they will be able to live the way they want in retirement, compared to just 64% of those who do not. Also, 69% of retirees who own an annuity are more confident that they will not run out of money if they live to age 90, compared with 57% of retirees who do not.
Written by Rachel Summit