Tremendous variation exists among variable annuity buyers today. This analysis profiles that and also points to where the sales are.
The average retail VA buyer, based on our study of more than 750,000 contracts representing over 60% of all new retail VA sales in 2004, looks like this: is 58 years old; has $77,000 invested into the contract; and is as likely to be male as female.
That is very broad. To find the opportunities, we look to the details.
Age. Over 75% of retail VA buyers are age 50-plus; almost one-third of buyers are age 65-plus. Moreover, they tend to have higher premium amounts than younger buyers. For example, the average sale to those 65-plus is $90,000 vs. $70,000 for those under 65.
Nonqualified and IRA buyers. While older buyers tend to have higher premiums, they also tend to purchase nonqualified VAs averaging $82,000. The average nonqualified VA buyer is in the early 60s and often transfers assets from mutual funds, stocks, inheritance and real estate proceeds.
On the other hand, the average IRA buyer is in the mid-50s and has a smaller average premium ($71,000) than nonqualified buyers. IRA buyers can be divided into those making contributions and those funding the IRA via qualified retirement plan rollovers. Based on 2004′s maximum contribution ($3,000 plus $500 more for those over age 50), about 90% of all IRA VA buyers funded IRAs with rollovers. The other 10% used contributions (or rollovers under $3,500).
The average age of buyers funding an IRA with rollover money is 56, considerably older than the average age of buyers making contributions (43). Most likely, the needs of these two segments differ. Rollover buyers often require more comprehensive retirement planning/advice than mid-career workers, who may need investment management and accumulation guidance.