Speak with a Registered Agent: 1-866-223-2121

Speak with a Registered Agent: 1-866-223-2121

Fixed Annuity Sales Surge, but Common Trends Will Soon Return


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Annuity sales—also supported by rising interest rates—are surging. According to InsurnaceNewsNet.com, if current market conditions hold, fixed annuities, fixed-indexed annuities (FIAs), and registered index-linked annuities (RILAs) are predicted to compete more fiercely with one another during the next five years.

If these fixed annuity rates remain high, advisors and their clients will likely continue as well, electing a predictable rate of return with full principal protection versus annuities that offer much potential with principal at risk. Nevertheless, as interest rates decrease over time, Cerulli predicts, by 2027, market share of fixed-indexed annuities (FIAs) as a percentage of total annuity sales will increase and reach 26%, followed closely by RILAs (23%) and traditional fixed annuities (20%). “With financial markets and economic news remaining unsettling for many investors, annuities that provide predictable outcomes will remain a hot commodity,” states Donnie Ethier, senior director.

RILA sales growth has outrun many other annuity types in the last few years, but recently, thanks to rising interest rates, these products have met stronger competition from traditional fixed annuities and FIAs. This situation will be worth watching in 2023 and 2024. It is clear from research that traditional variable annuity (VA) sales will remain under pressure as insurers and advisors steer clear from selling VA’s with benefit guarantees.

Cerulli sees three possible areas of growth within the annuity market in the coming years. All of them are reflective of the needs and preferences of the 44% of retired households citing a comfortable standard of living in retirement as their most important financial goal. Yes, insurers have done their part to enhance product solutions, but those that remain committed to the VA marketplace should expand their focus on guaranteed withdrawal benefits (GLWBs). Insurers should also bring more annuities to defined contribution plans. The SECURE Act of 2019 and the just-enacted SECURE 2.0 extend the distribution age requirement and provide retirement savings incentives for qualified plans. The third and final area of growth lies in supporting the cost of long-term care, (LTC) intentions should include in-plan annuities, income-taking solutions, LTC hybrids, and inflation protection features.

The present and beneficial conditions in the annuity market has Cerulli believing insurers need to use this leverage, and nudge the industry conversation toward product concepts. “Understandably, the industry is focused on principal protection right now, but the income story of annuities will return and grow in importance,” states Ethier. “The industry would benefit from more studies that compare the pros and cons of various income strategies, such as systematic withdrawals from one’s investments, traditional annuity payments, and GLWB withdrawals,” he adds.

For more information contact Annuity FYI at 1-866-223-2121 to speak to a registered agent. You can also visit our website, AnnuityFYI.com, or send us an email at support@annuityfyi.com.

Written by Rachel Summit

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