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An inside look at what’s driving Annuities in 2015

Annuities are more popular than ever and it’s fixed index annuities that are leading the pack.

Dynamic growth propelled the annuity industry in 2014, according to Annuity News, with fixed index annuities (FIAs) emerging as the number one retirement savings vehicle for thousands of soon-to-be retired folk. Showing no signs of slowing in 2015, FIAs are expected to benefit from several trends, which are creating an optimistic landscape for annuity purchases dominated mostly by baby boomers and, believe or not, GenXers.

2015 Consumer Insights on Retirement Income Planning

The recently released Insured Retirement Institute’s State of the Industry Report shows that Baby Boomers are taking a more active approach to calculating savings goals. Top of mind is determining expected expenses while also seeking solutions for longevity challenges. Unfortunately, despite a focus on preplanning, Boomers are becoming less confident in their ability to achieve a successful retirement. Individuals reporting that they are better prepared and confident about investing for retirements share two distinctions: they are working with a financial profession and/or incorporate annuities into their retirement strategies.

Key Report Findings Regarding Retirement Planning and Retirement Income Goals:

  • In 2011, 37% Boomers reported they are confident they will have enough money to live comfortably throughout their retirement years. This number has dropped to just 33% in 2014.
  • The percentage of not-yet-retired Boomers who are planning to retire at age 70 or later has increased substantially, from 17% in 2011 to 28% in 2014.
  • In 2014, 55% of Boomers said they calculated a retirement savings goal, compared to 50% in 2013. Of those who have determined a savings goal, 76% said this calculation factors in estimated costs for health care expenses.
  • Boomers who own insured retirement products have higher confidence in their overall retirement expectations, with nine out of 10 believing they are doing a good job preparing financially for retirement.
  • Baby Boomers and certain GenXers are attracted to annuities due to two key product features: guaranteed income in retirement (90%) and principle protection (84%).
  • Eight out of 10 investors say that they are better prepared for retirement as a result of working with a financial professional.

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One of the most interesting annuity trends going into 2015 is the fact that more and more buyers of annuities are now in their 40s and 50s instead of their 60s. These younger individuals are taking a proactive approach to retirement by purchasing fixed indexed annuities. These so-called GenXers are somewhat financially conservative but also want to capitalize on stock market gains. Fixed index annuities represent the perfect vehicle for those who do not wish to gamble on the stock market with money they have diligently saved for their retirement.

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Annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

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