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Retirement Planning > Retirement Investing

The atypical annuity purchaser

By Sheryl J. Moore

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If you had asked me 10 years ago to guess the average issue age for indexed annuities, I would have likely guessed age 35. In reality, AnnuitySpecs.com’s Indexed Sales & Market Report for fourth-quarter 2011 indicates that the average age of indexed annuity purchasers today is 65. That’s a huge discrepancy, and unnecessarily so. Why don’t more young people buy annuities? So many of them suffered losses in 2008’s market collapse, and they are looking for alternatives to their current “retirement plans.” They also know that Social Security will be vastly different when they retire than it is now. So, why aren’t they buying products like indexed annuities?

Insurance agents’ remarks on the matter provide some insight. Frequently, many say they are “too young” to own an annuity.

So, I just have to ask, what makes someone “too young” to purchase an annuity? I was confused with the “too young” comment years ago and now that I am an insurance expert, I am even more confused.

Another retirement option

After all, a deferred annuity is just another retirement income accumulation vehicle. Is anyone too young for a certificate of deposit or bonds? Would you wait to propose a 401(k) to an individual until they were on the brink of retirement? You get my point. Deferred annuities are a tremendous tool for young savers who want the tax-advantaged benefits of annuities, in addition to an income that they cannot outlive. So, why aren’t they buying them? You tell me.

I purchased my first annuity when I was in my 20s. I actually regretted the fact that I hadn’t bought it years earlier. Why would I even explore retirement options if my employer was endorsing the 401(k)? It never occurred to me not to use a 401(k) plan as my retirement income vehicle.

Until the turn of the century.

I lost tons of money when the market collapsed in the 2000s. I didn’t even know that you could lose money in a 401(k); I never read the prospectus. It was only when I complained about my losses that my boss suggested an indexed annuity may be more appropriate for me, based on my risk tolerance. Wow. That would have been great information a couple of years prior. Nonetheless, I rolled my remaining 201(k) into an indexed annuity that same year.

An opportunity awaits

Findings suggest that if young people were educated on their choices for retirement income vehicles, sales of annuities could easily surpass contributions to other retirement plans. And with the number-one fear of Americans now being “outliving one’s income” during retirment, that sounds like an opportunity to me.

Younger prospects need to know about the benefits of annuities.

Sheryl Moore is president and CEO of AnnuitySpecs.com and LifeSpecs.com, indexed product resources in Des Moines, Iowa. She may be reached at [email protected].

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