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How workers’ need for lifetime-guaranteed income may drive more Americans to consider annuities

The goal of a successful retirement is to have enough guaranteed income to cover basic living expenses and not have to worry about running out of money for the rest of your life. According to recent LIMRA research, workers today do not feel that their households will receive enough lifetime-guaranteed income to cover basic living expenses throughout retirement.

The decision to buy an annuity or not can be a complex one. Understanding the factors that influence an investor’s decision to buy can help carriers design and market products and guide financial professionals’ approaches when speaking to their clients.

Life insurance and financial services companies faced a tough business climate over the last several years ― from the fallout of the pandemic, to rising interest rates and inflation, to the increased use of technology, to heightened customer expectations. LIMRA spoke with industry executives to see how their companies are handling these challenges and what they see for the future.

Financial literacy is one’s ability to understand the tools and concepts needed to make sound financial decisions. Often, this includes effective budgeting, saving, and investing but extends into income security. A lack of knowledge can inhibit consumers from protecting their income with products like life insurance and annuities.

LIMRA Research Head explains the growing market opportunity for in-plan guarantees and the role of education.

Following the recent passing of the SECURE Act 2.0, the financial services industry expects greater adoption of in-plan guarantees in late 2023 and 2024. In-plan guarantees are plan designs offered by employers that can convert retirement savings into a stream of guaranteed income payments during retirement. Designs of in-plan guarantees include annuities inside a target date fund (TDF), a stand-alone annuity product, and annuity options outside of the plan but linked to it. Educating advisors, plan sponsors, and employees on the value of in-plan annuities will affect their acceptance.

Facing unprecedented long-term market volatility in 2022, consumers sought the protection offered by fixed annuities, propelling a record-high $312.8 billion in total U.S. annuity sales. According to LIMRA’s 2022 Individual Annuity Sales Survey, total 2022 annuity sales increased 23% over 2021 results and were 18% higher than the previous record of $265 billion set in 2008.

In recent years, more Americans realize the importance of holistic wellness. In the workplace, employees look to their employers for wellness offerings to reduce financial, emotional and physical stress. According to LIMRA research, 74% of employees who experience a high degree of financial pressure believe employers should offer programs to address this particular stressor. Employees with moderate financial stress and those with no/very little stress also agree.

With the COVID-19 vaccination rate up and the number of deaths significantly declining, only 1 in 5 adults are “very” or “extremely” concerned about the virus today, according to LIMRA’s October Consumer Sentiment in the Time of COVID-19 study. In the research, more than 3 in 5 adults say their lives are largely back to what they were like before the pandemic ― going from 31% in January to 62% in October.

Long-term care involves services, both medical and non-medical, provided to people who cannot perform basic activities of daily living such as dressing or bathing. People receive long-term support and services at home, in the community, or in a facility. According to the Department of Health and Human Services, someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years.

For the second consecutive quarter, annuity sales reached new heights. In the third quarter 2022, total annuity sales were $79.6 billion, a 27% jump from prior year results, according to preliminary results from LIMRA’s U.S. Individual Annuity Sales Survey.