Annuity Sales on the Rise, may Surpass all Time High

Annuity sales on the rise, may surpass all time high set in 2008. 

CBS News reported today that annuity sales are on the rise thanks to “market fears” and higher interest rates. Investors are seeking alternatives to the highly volatile stock market. While annuities may be a valid option for those opposed to risk, they may not be suitable for all investors. 

According to the article, Limra, an insurance industry group, forecasts annuity sales of $267 billion to $288 billion in 2022, surpassing the record of $265 billion set in 2008. 

Usually annuities serve one of two functions, as an investment or as a type of pension plan. According to the article, the recent surge in annuities sales are investors seeking to protect money from the volatility in stocks and bonds, not necessarily seniors seeking steady retirement income.  

CBS reports that the S&P Index is down more than 13% this year, and the Bloomberg U.S. Aggregate bond index is down more than 9%. As interest rates rise, bond prices decrease.  

While insurers offer investors better payouts and guarantees on all types of annuities, some consumers may not fully understand the product they’re purchasing, according to the article. 

Annuities may be more costly than mutual funds since insurers generally charge a premium for their guarantee. Also, investors typically can’t touch their money for many years without penalty, with a few exceptions. 

Fixed-rate deferred annuities were the big seller in the first quarter this year with $16 billion sold, up 45% from Q4 2021 and 9% from the same time last year, according to the insurance industry group. This type of annuity works like a certificate of deposit offered by a bank. The rate of return is guaranteed for a set period – say 3-5 years – and the investor can get their money back at the end of term or roll it into another annuity or convert their money to an income stream.  

Immediate or deferred-income annuities (annuities with pension-like payments) are not seeing the same growth, according to the article.  

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