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Tags: Fixed | Indexed | Annuities | Retirement

Fixed Indexed Annuities Address Long-Term Retirement Concerns

Joe Stark By Thursday, 05 February 2015 03:04 PM EST Current | Bio | Archive

Baby boomers, the generation born between 1946 — soon after the end of World War II — and 1964, make up 20 percent of the U.S. population. In 2014, people from this generation were between age 50 and 68, a prime age to think about their impending retirement.
But boomers have realized that their retirement may look very different from their parents' — their generation is expected to outlive their parents’ generation by 10-25 years, according to Mark P. Cussen, CFP, CMFC, AFC, a finance writer for Investopedia.com.
This means that if they want to retire successfully, they either have to work longer or find a way to boost their reliable income during their golden years. Part of the strategy for many has been to purchase fixed indexed annuities, which will bring in a guaranteed benefit in those later years.
What Made 2014 a Record Setting Year for Fixed Indexed Annuity Sales?
The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. One of their functions is to look at retirement preparation facts and trends, and they have found some enlightening information. In IRI’s State of the Insured Retirement Industry 2014 Review and 2015 Outlook report, it was revealed that only 33 percent of people in the baby boom generation feel confident that their 401(k) fund and Social Security will be enough for them to live the way they want to in their retirement.
That figure is even lower than it was in 2011, when the overall confidence rate was at 37 percent. More boomers are planning on continuing to work past age 70 too. In 2011, 17 percent expected to still be in the workforce; by 2014 the percentage had jumped to 28 percent.
The same report indicates that reaching out for help confers a benefit, with 8 out of 10 indicating they feel better prepared for retirement because they have worked with a financial professional. Part of their confidence can be attributed to the integration of fixed indexed annuity products into their retirement strategies. When financial advisers were surveyed, three-quarters revealed that their clients were interested in annuities.
2014 was already a record year for annuities by the end of the third quarter (the most recent for which figures are available), with variable annuity net assets exceeding $1.9 trillion. Throughout the annuity market, sales were on track to be up 3 percent to 5 percent in 2014, performing at their highest rate since 2011.
Why FIA Sales Have Broken Records for the Last 3 Years
Issuers of insured retirement income products, such as annuities, have continued their own financial strengthening. Interest rates were low in 2014 for annuities, allowing for both sales and product development in order to meet the needs of those wanting to boost their retirement incomes in retirement. Fixed annuity sales in the first three quarters of 2014 were more than 25 percent higher than they were after three quarters of 2013. Fixed indexed annuity sales were up in 2013 as well and were better than variable annuities. Deferred income annuity sales had doubled to $2.2 billion in 2013 and were even higher in 2014.
IRI's State of the Industry report also notes that concerns over Social Security and other government programs, including the Affordable Care Act, also are increasing the appeal of fixed indexed annuities. Many existing programs that once were considered reliable now seem to have an expiration date. The 2014 Social Security Trustees Report projects the combined Old Age and Survivors Insurance and Disability Insurance Trust Fund will be exhausted in 2033 and the Hospital Insurance Trust Fund will run out in 2030.
The Appeal of FIAs
As NAFA Annuity Outlook Magazine points out, fixed indexed annuities offer protection in a future with many uncertainties. American are wondering how Social Security taxation, healthcare costs, and insurance costs will look in coming years. Many also have higher levels of debt than the generation before them, and less money set aside for retirement. They also realize that with a longer life expectancy, everything needs to last longer.
Younger generations are interested in staying on top of what they should expect in retirement as well. In 2014, IRI conducted a survey with Woelfel Research of 401(k) program plan participants, and revealed that 90 percent of respondents across all age groups considered it helpful to have retirement income estimates available, and over 75 percent found such estimates motivating enough to consider increasing their personal contribution level.
Will the Trend Continue?
At least in the next few years, fixed indexed annuities should continue to be popular. The realities that are driving their sales are not changing any time soon. IRI cites product innovation, such as the "uncapped" fixed indexed annuity, fueling growth as well.
People of all ages in the workforce have concerns about their ability to get the retirement income they need from their 401(k). Traditional pension plans are no longer part of the picture for most retirees.
The Bureau of Labor Statistics reports that only 19 percent of nonunion employees in the private sector have access to this type of pension.
Every bit of income they can tie down for their retirement years makes a difference. With fixed indexed annuities, the appeal comes primarily because of they offer guaranteed income in retirement, and overall principal protection. The trend is expected to continue and drive annuity sales even higher.
Concern over retirement income is not exclusive to baby boomers; every age group, including those new to the workforce, expresses a strong interest in starting to develop a retirement strategy.
Meet with an annuity agent from Crown Atlantic and learn more about appropriate contracts that can fit your specific requirements. Crown Atlantic agents look forward to showing you how much more income you can make from your retirement nest egg. Go online to CrownAtlantic.com/Protect or give us a call at 855-221-5546.
Joe Stark is the CEO of Crown Atlantic Insurance, LLC in Boca Raton, Fla. Stark is an insurance industry veteran with more than 25 years of experience. For more of his reports, Go Here Now.

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If baby boomers want to retire successfully, they either have to work longer or find a way to boost their reliable income during their golden years. Part of the strategy for many has been to purchase fixed indexed annuities.
Fixed, Indexed, Annuities, Retirement
Thursday, 05 February 2015 03:04 PM
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