Deferred income annuities (DIAs) are hot. According to Windsor, Conn.-based LIMRA Secure Retirement Institute, total annuity sales in 2013 reached $230.1 billion, an increase of 5 percent of 2012.
Drill down in the data and you’ll find a surprising stat: the DIA category showed the strongest year-over-year percentage growth, up 113 percent. That result is somewhat misleading because the increase was based on a very small 2012 base value of $1 billion.
Nonetheless, DIA sales doubled to $2.2 billion in 2013 and sales continue to grow rapidly. “It’s certainly one of the faster growing, if not the fastest growing annuity category,” says Ross Goldstein, managing director, retail annuities with New York Life in New York.
So what’s driving the market? Joe Montminy, assistant vice president, LIMRA SRI Annuity Research, points to several trends in an email response.
First, there are nearly 52 million Baby Boomers (age 50 to 65) close to retirement. LIMRA SRI research has found that 4 in 10 pre-retirees would consider annuities to help meet their basic living expenses.
Second, when you look back at the annuity market 6-8 years ago, there was much less focus on income solutions than there is today. Variable annuities, index annuities, and deferred income annuities have all incorporated features or riders that can provide income to individuals later on when they plan to retire.