Three-in-four consumers say they would be very interested in a financial product providing guaranteed lifetime income--even if they were unable to access the principal investment.
That’s according to “State of the Insured Retirement Industry,” a new report from the Insured Retirement Institute (IRI), which found that consumer demand and new marketing opportunities will fuel annuity growth for years to come.
Investor concerns over longevity risk, fears about Social Security insolvency, uncertainty about how to create lifetime income and SECURE Act annuity provisions will all drive projected growth in annuities, IRI said.
Some three-in-four consumers ages 35-to-44 say they would be very interested in a financial product providing a greater amount of guaranteed lifetime income than a nonguaranteed alternative, even if they were unable to access the principal investment, the new research found.
In addition, as many as 95% of consumers are very or somewhat interested in guaranteed lifetime income in an annuity, the IRI found. The most important traits consumers want in an annuity are “guaranteed income each month” and “will not lose principal.”
Equally important, only 28% of Baby Boomers receive or expect a pension, the trade group noted.
“While persistent low interest rates may impact sales in 2020, the SECURE Act lifetime income provisions and the increased availability of newer products such as structured annuities offer promise of greater consumer demand and access to lifetime income products,” said IRI, whose members account for 90% of annuity assets in the U.S.
Pew Research Center estimates that 10,000 Baby Boomers will turn 65 every day for the next 13 years.
While Americans report more wealth, longer lives mean longevity risk and the need for assets to last longer, IRI said. Fidelity Investments reported the average 401(k) balance was $105,200 in the third quarter of 2019, down slightly from an average of $106,500 in the third quarter of 2018. For long-term savers (those in their plans for 10 or more years) the average balance reached a record $306,500 in Q3 2019, versus the previous high of $306,000 in Q3 2018.
Americans are also growing more dependent on their assets to generate sufficient retirement income. IRI research on Americans retired for between five and 15 years finds that 79% of retirees with at least $100,000 in retirement savings receive pension payments, with 64% citing a pension as providing at least 25% of their income.