As Boomers Age, Expect Income Annuity Sales To Grow
By Bill LaVanne
They are 76 million strong and graying. Americas largest demographic–the Baby Boomers–began turning 56 this year.
As you may expect, the oldest boomers are increasingly turning their attention to post-retirement planning. Thats one big reason the insurance industry is betting immediate annuity sales are poised for explosive growth.
Also called income annuities or payout annuities, immediate annuities have definite appeal to this age group: They provide aging Boomers with “income insurance”–i.e., a guaranteed stream of income they cant outlive.
Given the continued demise of the once very common defined-benefit pension plans (which also guarantee an income stream in retirement), its not surprising to learn that immediate annuity sales are now on the rise (with lots of room for growth).
In 2000, for example, LIMRA International reported a 45% increase in annuity sales over 1999, with $4.2 billion of the $190.2 billion total going towards the purchase of immediate annuities.
More than any other generation, those born between 1946 and 1964 face unique financial challenges.
On average, Boomers waited longer to have children. A majority will enter retirement with ongoing financial obligations like a mortgage or funding a college education. They wont be able to rely on a lifetime pension from their employer.
Social Security, if its around by time the Boomers retire, will become available later in life and will replace only a small percentage of their pre-retirement income.
And, chances are good that Boomers will live longer than their parents and grandparents, thus extending the period during which they will need retirement income, compared to their predecessors.
What makes the immediate annuity such an ideal retirement planning tool for this group (and other newly minted retirees)? It can help create a balance between assets and liabilities–in other words, it can fill income gaps by matching income to expenses.