The good news for the annuity industry: most Americans would consider the fixed-income products to finance some aspect of their retirement.
The not-so-good news: more than half of those surveyed don’t really understand how annuities work.
According to a study by The Phoenix Cos., nearly three-quarters (71%) of Americans would consider using annuities to establish predictable income in retirement, as a vehicle to protect inheritances, or as way to protect money for health and chronic care expenses.
But 53% said they are “not familiar with annuities,” according to Phoenix Companies, and only 20% are actually planning to use an annuity to convert retirement savings into a set income stream.
The survey confirms what annuity-industry insiders have suspected anecdotally for years, says Mark Fitzgerald, national sales manager for Saybrus Partners, a subsidiary of Phoenix. People “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.”
When investors have annuities explained to them, particularly the variety of annuities designed to protect income for specific purposes in retirement, such as long-term health care costs, people show a strong interest, Fitzgerald said. “The annuities available today are not your grandfather’s annuity.”
About half of respondents said they would use annuities to establish an income stream. Forty-one percent said would use and annuity as an inheritance vehicle, and 36% said they’d use an annuity to establish reserves for health-care expenses.