Consumers See Annuities As Answer To Top Retirement Worry: Survey
NEW YORK CITY – A new LIMRA Secure Retirement Institute (LIMRA SRI) study of annuity owners finds the top two reasons consumers buy annuities are to supplement Social Security/pension income and to receive guaranteed income payments for life.
“Our research consistently shows consumers are worried about running out of money in retirement – 67 percent of pre-retirees list having enough money throughout retirement as their top financial goal,” noted Jafor Iqbal, assistant vice president, LIMRA SRI.
“Annuities are fundamentally unique investment products, offering some combination of guarantees – guaranteed income that investors cannot outlive, protection of principal from market volatility, or guaranteed death benefits for beneficiaries. As more Americans face retirement without the benefit of a pension and growing longevity risk, an annuity can provide peace of mind.”
This new research is included in the fourth edition of LIMRA SRI’s Retirement Income Reference Book. Conducted every three years, The Retirement Income Reference Book offers an extensive view of the retirement income market, as well as unique insights into consumer behaviors and perceptions.
Shift in Sources of Income
LIMRA SRI research finds that the primary source of income for those in retirement is expected to change. Today, Social Security and pensions make up the primary sources of income for 70 percent of retirees. This shifts significantly when looking at pre-retirees (ages 55 and older, not retired) and workers ages 40-54.
Less than half of pre-retirees (49 percent) and under a third of younger workers (32 percent) say they will rely on Social Security and pensions as their primary sources of income. Instead, they will primarily use savings from employer-sponsored retirement plans, IRAs and other savings vehicles to fund their retirement years. Four in 10 pre-retirees and more than half of workers, ages 40-54, (53 percent) expect their primary source of income to be from their 401k, IRA and other savings.
“While these savings platforms are good solutions for accumulating assets, they often do not offer a way to create guaranteed income that retirees say they want and need, noted Iqbal. “Working with an advisor to create a formal retirement plan, consumers can determine whether investing a portion of their nest egg into guaranteed income through an annuity is a good solution for them. Our research shows seven in ten retired annuity owners are more confident that they are more likely to afford their preferred retirement lifestyles - even if they live to age 90 or older.”
This October marks the fifth anniversary of the LIMRA LOMA Secure Retirement Institute. Since it was established in 2013, the Institute has been supporting the retirement industry by providing research and education in order to improve retirement readiness and security.