8 facts (for advisors) about annuities and consumers

A recent survey by The Phoenix Companies revealed some great news for annuity advisors as well as disconnects for the safe product and consumers.

According to the survey, “71 percent of Americans said they would consider buying an annuity to meet a variety of needs, including predictable monthly income, leaving an inheritance for their heirs, assistance with chronic care expenses and asset accumulation opportunities.”

That’s the good news.

On another note: “More than half (53 percent) of the participants said they were not familiar with annuities, and only 20 percent are actually planning to use an annuity to convert their retirement savings into an income stream.”

In the following pages, we’ll take a look at highlights from the study, which surveyed 1,004 U.S. adults in June of this year.

1. The Great Disconnect

“This survey confirmed statistically what we have heard anecdotally for years — that the majority of Americans don’t have a deep understanding of today’s annuities,” said Mark Fitzgerald, national sales manager for Saybrus Partners, Phoenix’s distribution subsidiary. 

“They don’t necessarily understand the basic income protection traditionally offered on all annuities, and they also are not aware of the range of benefits available on newer products, such as accumulation and chronic care features.

“At the same time, when these newer types of features are described, a lot of people say they would consider buying the product,” Fitzgerald said. “Annuities available today are ‘not your grandfather’s annuity.’”

2. Safety in Retirement

When Americans were asked which benefits they would consider purchasing an annuity, about half (49 percent) indicated they would purchase one to secure a predictable source of monthly income for retirement.

Forty-one percent said they would purchase an annuity to leave money for their spouse or heirs. More than a third (36 percent) said they would purchase an annuity to provide money for chronic healthcare expenses, while 31 percent indicated they would purchase one for asset accumulation opportunities. Twenty-five percent said they would not consider purchasing an annuity for any reason.

Regardless of this interest in the various benefits annuities offer, the survey showed that most Americans would not describe themselves as familiar with the product. Fifty-three percent of participants indicated they were not familiar with annuities, (19 percent were “not very familiar” and 34 percent were “not at all familiar”). Thirty-two percent consider themselves “somewhat familiar,” and only 13 percent of participants said they were “very familiar.”

3. Converting Retirement Savings into an Income Stream

Conventional wisdom says that creating a dependable stream of income in retirement is a major challenge for pre-retirees and retirees. 

Surprisingly, then, 69 percent of the non-retired participants in the survey said they were confident they will be able to convert retirement savings into a predictable source of monthly income.

28 percent said they were “very confident” and 40 percent said they were “somewhat confident”.

“Despite this high confidence level, many Americans are not on the right track with creating a predictable stream of income in retirement,” said Fitzgerald. 4. Risks in Retirement More than half (55 percent) of those surveyed said that they plan to use their savings as a supplement to their pension and/or Social Security only as needed. 

“When people say their savings will serve only as a supplement to a pension or Social Security, I consider it a signal that their savings will not be a significant source of income,” Fitzgerald said.