LifeHealthPro sat down with Jafor Iqbal, assistant vice president of the LIMRA Secure Retirement Institute to discuss annuity buying behavior and how advisors can sell more annuities. Iqbal studies retirees and the role of financial advisors in retirement income planning.
Q. Why do you think annuities are gaining in popularity?
A. This phenomenon is due to annuities’ value proposition. An annuity is the only financial product that can offer a guaranteed lifetime income not only for yourself, but also for your spouse. There is no other financial product that can do that while taking care of market risk, market volatility and what the industry now calls “sequence of risk.” So, for example, annuities remain undisturbed if the market drops on the day after an individual retires. Annuities’ core value proposition becomes very attractive particularly to households that have limited assets but that want to make sure that their retirement is secure and they want to put a small portion of their portfolio into annuities to make sure their living expenses are covered. In addition, annuity ownership gives individuals peace of mine in their retirement years. Our research shows that annuity owners are more confident in their retirement finances and their ability to live their desired post-retirement lifestyle than those without annuities.
Q: Does annuity ownership correlate with client wealth level?
A. Yes, but only up to a point. Nineteen percent of mass-affluent clients with between $100,000 and $249,999 in investable assets own a deferred annuity, while only 4 percent of individuals with less than $100,000 own an annuity. So there’s a big leap – almost quadruple – from annuity ownership by those with less than $100,000 to those with $100,000 to $250,000. What’s more, nearly 26 percent of clients with more than $250,000 in investable assets own an annuity. While annuities are quite popular among the mass affluent and affluent, this popularity plateaus at up to $2 million of wealth, and then annuity ownership starts to decrease.
Q. Do men purchase annuities more frequently than women? Or is it the other way around?