Retirement savers eye guaranteed lifetime income amid recession fears
With concerns about the US economy and the possibility of a recession, retirement savers are increasingly seeking some sort of assurance that they won’t outlive their nest eggs. To meet this demand, sales of annuities, which offer a guaranteed stream of monthly income like Social Security and pensions, have soared. According to a recent survey by Morning Consult for the American Council of Life Insurers (ACLI), over half (54%) of retirement savers are now considering a type of guaranteed lifetime income.
“The results show that retirement savers are clearly concerned about inflation and the overall economy,” said Susan Neely, ACLI’s president and CEO.
The passage of the Secure Act has also made it easier for employers to offer annuities as a retirement savings plan option. Going forward, insurance companies, asset managers, and employers are all working towards making these guaranteed lifetime income options more broadly available through 401(k) and other defined contribution plans.
Starting in the fall, Fidelity will let plan participants convert some of their retirement savings into an immediate income annuity, allowing them to receive pension-like payments throughout retirement. The interest in annuities is expected to continue to grow because investors can get more value for their money.
Frequently Asked Questions (FAQs):
Q: What are annuities?
A: An annuity is a financial product that pays out a stream of payments to an individual over an agreed-upon period, often for their entire lifetime. The payments can be monthly, quarterly, annually, or as agreed upon in the contract.
Q: Why are retirement savers increasingly choosing annuities?
A: Retirement savers are seeking some sort of assurance that they won’t outlive their nest eggs. Annuities offer a guaranteed stream of payments often structured like Social Security and pensions.
Q: What is the Secure Act?
A: The Secure Act (Setting Every Community Up for Retirement Enhancement Act) is a federal law that was passed in 2019 aimed at helping Americans save more for retirement. It makes it easier for employers to offer annuities as a retirement savings plan option.
Q: What is Fidelity offering to plan participants?
A: Starting in the fall, Fidelity will let plan participants convert some of their retirement savings into an immediate income annuity, allowing them to receive pension-like payments throughout retirement.
Q: How can I compare annuity offerings and fees?
A: When considering an annuity, it’s important to compare offerings and fees from different providers. A financial planner can help guide you through the process.
Amid recession fears, retirement savers consider guaranteed lifetime income
Amid growing concerns about a possible recession and the state of the US economy, recent reports show that most retirement savers are seeking some kind of assurance that their nest eggs won’t run out. This has led to a surge in demand for annuities, with a new survey by Morning Consult for the American Council of Life Insurers (ACLI) showing that 54% of retirement savers are contemplating a guaranteed lifetime income. “Retirement savers are clearly concerned about inflation and the overall economy,” said Susan Neely, ACLI’s president and CEO.
The passage of the Secure Act has also made it easier for employers to offer annuities as one option in retirement savings plans. Insurance companies, asset managers, and employers are moving toward making these guaranteed lifetime income options more widely available through 401(k)s and other defined contribution plans. Fidelity will permit plan participants to convert some of their retirement savings into an immediate income annuity to offer pension-like payments throughout retirement. BlackRock and State Street Global Advisors have also announced retirement income annuity options.
Having an annuity option when retiring can be beneficial for those lacking confidence. However, individuals should compare offerings and fees when evaluating any annuity, said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners, based in Jacksonville, Florida. Annuity sales reached all-time highs in the first quarter of 2023, growing to approximately 50% from the previous year, indicating growing interest in the product during volatile market conditions.