Think of annuities as only an old person’s product? Think again.
During a webcast held yesterday morning, appropriately titled, “Not Your Grandfather’s Annuity: Why Fixed Index Annuities Make Sense in Today’s Low-Interest Environment,” Eric Taylor, vice president and national sales manager, annuity sales, at Genworth Financial, and Kim O’Brien, executive director of the National Association of Fixed Annuities (NAFA), both spoke of younger people’s growing interest in the product.
In fact, O’Brien recalled how her 30-year-old niece recently said that she wanted to know more about the fixed indexed annuities. “It’s starting to hit younger people,” she said.
Taylor said the product’s target market is skewing younger, from the traditional consumer in their early 60s, to those in their mid-to-late-50s.
In the opening of the webcast, the duo elaborated on why consumers of any age would find a fixed indexed annuity an attractive investment option. These trends have been documented by numerous studies on the future of retirement in the U.S. that detail the market forces and demographics at work.
Years of market volatility and low interest rates have led people to seek a vehicle that acts as a buffer against stock market gyrations; guarantees an income stream in retirement; and provides a measure of growth beyond other safe money alternatives like a CD. “A fixed indexed annuity can do that,” Taylor said.
At the same time, that collective mindset has collided with a dramatic drop in the number of people getting retirement income from a traditional employer defined-benefit (DB) plan. And that includes the tidal wave of baby boomers hitting retirement age.
Back in 1983, there were about 180,000 defined benefit plans in the U.S. In 2010, that number has fallen to less than 20,000. According to O’Brien, by 2013, DB plans will tally between 15,000 and 10,000. “They’ve gone away almost completely,” she said.