LIMRA's Guaranteed Income Annuities report, released Monday, identified trends in annuity sales and uncovered who is most likely to purchase immediate annuities.
LIMRA examined over 55,000 immediate annuity contracts issued in 2008 and 2009 for the study and found that 60% of immediate annuity contracts are purchased by women.
Additionally, the average age for purchasers is 73, and the report noted that purchases made with pre-tax money were more likely to be "clustered around ages that correspond either to the onset of Social Security benefits or IRS required minimum distributions."
Dr. Matthew Drinkwater, associate managing director of retirement research for LIMRA and author of the report, describes the typical annuity buyer.
"The typical immediate annuity buyer is a woman in her 70s who is selecting a lifetime payout, with a guaranteed payment (either a period certain or refund option)," he wrote in an e-mail interview with AdvisorOne. "Usually the typical buyer will be drawing from after-tax money, and on average she is converting over $100,000 into guaranteed income."
Typically, payments received do not increase over time, Drinkwater wrote, noting that "buyers tend to avoid features that would automatically increase payments by a fixed amount or with inflation."
"However," he added, "buyers do tend to select liquidity features that allow them to commute remaining payments into a cash payment, or to access some of the underlying funds and continue to receive payments."
The average immediate annuity premium was just over $107,000, according to the report, and LIMRA estimates the unrealized annuitization market is $250 billion.
"LIMRA forecasts that the immediate annuity market, which was $7.5 billion in 2009, will increase to $7.7 billion this year and rise to $11 billion by 2013. Some of the growth will occur because of the underlying demographics (more of the large boomer population reaching the ages when these products are purchased)," Drinkwater wrote.