Consumers looking to bolster their Social Security or pension income, or looking for a guaranteed lifetime income, are buying annuities.
Those are the top two reasons for annuity purchases, according to a LIMRA Secure Retirement Income study of annuity owners. According to its research, the primary source of income for 70 percent of retirees is expected to change from the current primary sources of Social Security and pensions.
But when looking at preretirees (ages 55 and older, not retired) and workers ages 40–54, it’s a different story. With just 49 percent of preretirees and only 32 percent of younger workers saying that they’ll primarily rely on Social Security and pensions, both appear to be receding into the background—at least in younger workers’ expectations.
Instead, those still in the workforce are planning on using savings from employer-sponsored retirement plans, IRAs and other savings vehicles to fund retirement.
In fact, 40% of preretirees and 53% of workers ages 40–54 expect their primary source of income to be from their 401(k), IRA and other savings. But there’s a hitch: those income sources aren’t guaranteed for life, as are Social Security and pension income. And that leaves younger people with a dilemma: how to make their money last.
“Our research consistently shows consumers are worried about running out of money in retirement—67 percent of preretirees list having enough money throughout retirement as their top financial goal,” Jafor Iqbal, assistant vice president, LIMRA SRI, is quoted saying.
Iqbal also points out, “While these savings platforms are good solutions for accumulating assets, they often do not offer a way to create guaranteed income that retirees say they want and need”—something that annuities do.
He explains: “Annuities are fundamentally unique investment products, offering some combination of guarantees—guaranteed income that investors cannot outlive, protection of principal from market volatility, or guaranteed death benefits for beneficiaries.”
Those guarantees can make a difference in peace of mind for workers looking to retire with a more secure form of retirement income, as Iqbal adds: “Our research shows seven in 10 retired annuity owners are more confident that they are more likely to afford their preferred retirement lifestyles—even if they live to age 90 or older.”
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