More than 9 in 10 asset managers believe that annuity products carry a negative connotation, according to the latest retirement research from Cerulli Associates, including nearly 1 in 5 who strongly hold this view.
This figure has grown significantly from the 79% reported in 2019, despite a growing stable of research demonstrating the positive impact that partial annuitization can have on retirement income strategies. While the “strongly agree” camp declined from 24% to 19%, the negative perspective has nonetheless increased, indicating that more asset managers now recognize the persistence of this stigma.
“Annuities continue to face perception issues due to high fees, complexity, lack of transparency, and concerns about insurer solvency, all of which deter [investors],” Idin Eftekhari, senior analyst, said in a statement.
As Eftekhari observed, the tradeoff between liquidity and a guaranteed income stream is unappealing for many participants.
“While annuities provide predictable payments, they do so at the cost of limiting a participant’s access to capital,” he noted.
Cerulli’s report also points to growing uncertainty and divergence in opinions regarding the necessity of guaranteed income in retirement solutions among asset managers themselves. In 2019, 42% of asset managers believed that an effective in-plan retirement income solution must include a guaranteed component. This figure now stands at 37%, and the neutral stance has increased from 18% to 25%.
General disagreement, though, remained relatively consistent, measuring in at 39% in 2019 versus 38% in 2024.
The combination of findings, according to Eftekhari, has important implications for retirement savers, employers, asset managers, financial advisors and retirement plan recordkeepers. For all parties, recognizing varying preferences will be crucial in designing effective retirement strategies.
Those who have a negative view of annuities tend to see target-date funds, managed payout funds and dynamic withdrawal frameworks as viable alternatives to annuitization. These approaches allow participants to maintain growth exposure while implementing systematic withdrawal methodologies tailored to their spending needs.
On the other hand, the tradeoff between liquidity and security is appealing for some, as the guaranteed payments help reduce anxiety about market fluctuations and longevity risk.
“While some participants prioritize liquidity and growth potential, others place more value on the peace of mind provided by a guaranteed income stream,” Eftekhari concluded. “These individuals are comfortable with dedicating a portion of their retirement assets to an annuity, ensuring a predictable cash flow to cover essential expenses.”
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