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Annuity owners: Well-informed and secure

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If your retired clients say that financial peace of mind is a top priority — and who doesn’t want that? — they could be good candidates for annuities. Over the years, studies of annuity owners have shown that the products provide a greater sense of financial security. That makes sense because annuities provide stable retirement income.

For example, a 2009 survey by The Gallup Organization and Mathew Greenwald & Associates found that 79 percent of non-qualified annuity owners surveyed considered annuities an important source of retirement security and comfort in times of financial uncertainty.

A 2014 LIMRA Secure Retirement Institute Study of 2,000 households age 50 to 75 with $100,000 of investable assets reinforces the belief that annuities’ enhance owners’ sense of financial security. Specifically, respondents cited peace of mind, stable income and lessening the risk of running out of money in retirement as the three top reasons to create a guaranteed income. The result held for both annuity owners and non-owners and was consistent across asset levels, according to Jafor Iqbal, associate managing director and the study’s author.

About one-third of the households own an annuity and they’re happy campers: four out of five owners believe the products are a good fit for their financial needs and 70 percent are willing to recommend annuities to friends and family members.

The survey results challenge the notion that annuities are sold, not bought. The study asked participants multiple questions to gauge their understanding of the products and more than 80 percent of annuity owners scored well with their responses.

That’s encouraging, Iqbal maintains, because an annuity purchase is often a consumer’s largest financial transaction. “These customers really put some thought into these things,” he says. “They have invested that kind of money into annuities because most of them felt or most of them admitted that the annuity fit into their retirement plan and into their retirement goals. That was very, very satisfying to find.”

Another finding: consumers with positive attitudes about annuities are six times more likely to own one versus those who are unfamiliar with or have negative attitudes toward the product. That finding could be expected — a positive attitude toward a product is typically a prerequisite for purchase — but the gap is surprisingly wide.

Among the remaining two-thirds of non-owners, debunking annuity myths and showing how the products fit within the retirement income plan is essential, he says: “Any conversation that advisors have with their clients about annuities, needs to show, how does that fit into the plan? If there’s a haphazard way of presenting annuities, [that] probably would not make that client positive about annuities or any of the financial products.”


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