What You Need to Know
- The Indexed Annuity Leadership Council sponsored the survey.
- The council found that the COVID-19 pandemic has increased savings inequality.
- About 12% of the participants who are working full-time said their savings increased significantly.
Older U.S. residents may be more likely to own annuities if they live in households with annual income from $50,000 to $74,999, or with income from $100,000 to $149,999.
The Indexed Annuity Leadership Council (IALC) found those two pockets of annuity ownership strength when it commissioned a new survey. A team conducted the survey in April. The sample included a total of 20210 U.S. adults and 760 U.S. adults ages 55 and older.
IALC has published some of the data and shared additional data, for adults ages 55 and older, with ThinkAdvisor.
The Income Effect
IALC represents insurers, distributors and other organizations with “fixed indexed annuities” — annuities with crediting rates tied to the performance of an investment index, and designed in such a way that a drop in the investment index cannot cause loss of annuity value.
About 7% of the participants ages 55 and older said they had an indexed annuity, and 7% said they had a variable annuity.
The $50,000-$74,999 Household Income Group
The survey team found participants with annual household income from $50,000 to $74,999 were less likely to have personal or employer-sponsored retirement accounts than higher-income participants, and more likely to buy annuities when they did invest.
These participants may be buying annuities partly because of lack of access to other types of affordable secure retirement savings vehicles.
Only 38% of the participants in that income category said they had an IRA, and just 23% said they a 401(k) plan or other defined contribution retirement plan account.
Roughly 8% of the investors in that income group said they had indexed annuities, and 12% said they had variable annuities.
People in this income category owned 27% of all of the indexed annuities and 29% of the variable annuities owned by IALC survey participants.
The $100,000-$149,999 Household Income Group
Participants in the $100,000 to $149,999 household income category were about as likely to report having most types of savings and investment products and accounts as participants in the very highest income category — for households with annual income over $150,000 — but they were more likely than the highest income participants to report having annuities.
These participants may like annuities because they face fewer tax complications than people with income over $150,000 but have less ability to invest in real estate and some other investments: Only 12% of the IALC survey participants in the $100,000-$149,999 income category report having a type of investment not named in the IALC asset-type survey question. About 21% of the participants in the $150,000-and-up category said they had “another type of investment.”
About 11% of the participants in the $100,000-$149,999 household income category said they had indexed annuities, and 13% said they had variable annuities.