Sales of Indexed Annuities Are Up. Here’s Why.

Indexed annuity sales set records in the third quarter of 2018, according to the preliminary Wink’s Sales & Market Report, in its 85th edition. Non-variable annuity sales—which include indexed annuities, traditional fixed annuities and multi-year guaranteed annuities—increased almost 5% as compared to Q2.1

While variable annuities usually participate in the stock market, thus are subject to market risk or losses, non-variable annuities such as indexed annuities do not. In fact, insurance companies offer principal guarantees.* Furthermore, they offer the opportunity for growth based on a “linked” index’s performance, such as the S&P 500. They are not actually invested in the market, but instead, insurance carriers credit interest based on terms spelled out the individual annuity policy’s contract language.

Indexed annuities, sometimes called “structured annuities,” are up almost 40% over the same time period last year

According to Wink’s:

 “Americans have had it with record-low rates on Certificates of Deposit (CD) accounts,” said Sheryl J. Moore, author of Wink’s Sales & Market Report. “Recent increases in annuity rates, coupled with incentives being offered by product manufacturers have really translated to sales momentum.”

Indexed annuity sales increased by more than 2% over the prior quarter and by more than 38% over the same period last year. Indexed annuities have a floor of no less than zero percent and limited excess interest that is determined by the performance of an external index, such as Standard and Poor’s 500®.1

The guarantees* plus income for life are the most attractive annuity features

The newest LIMRA Secure Retirement Institute (LIMRA SRI) study of annuity owners conducted every three years and included their fourth edition of The Retirement Income Reference Book finds the top two reasons consumers buy annuities are to supplement Social Security/pension income and to receive guaranteed income payments for life.2

“Our research consistently shows consumers are worried about running out of money in retirement – 67% of pre-retirees list having enough money throughout retirement as their top financial goal,” said Jafor Iqbal, assistant vice president, LIMRA SRI.

 “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. As more Americans face retirement without the benefit of a pension and growing longevity risk, an annuity can provide peace of mind.” 2

LIMRA SRI research finds that Social Security and pensions make up the primary sources of income for 70% of retirees today. However, this shifts significantly when looking at slightly younger demographics. Only half of pre-retirees 55+ and only a third of workers 40-54 say they will rely on Social Security and pensions as their primary sources of income. Instead, they will primarily use savings from employer-sponsored retirement plans, IRAs and other savings vehicles to fund their retirement years. 2

“While these [IRA and 401(k)] 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,” Iqbal said. “Working with an advisor to create a formal retirement plan, consumers can determine whether investing a portion of their nest egg into guaranteed income through an annuity is a good solution for them. 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.” 2

*Guarantees and protections of indexed annuities are subject to the claims-paying ability of the issuing insurance company. Indexed annuities are contracts purchased from a life insurance company. They are designed for long-term retirement goals, and also intended for someone with sufficient cash and liquid assets for living expenses and unexpected financial emergencies, including, for example, medical expenses. Depending on the product, indexed annuities may include surrender charges, rider charges and other fees.
An indexed annuity is not a registered security or stock market investment. As such, it does not directly participate in any stock, equity or bond investments, or index. Gains on indexed accounts are based on participation rates and other conditions offered by the issuing insurance company. Withdrawals are subject to income tax, and withdrawals before age 59½ may be subject to a 10% early withdrawal federal tax penalty. This article is for informational purposes only and is not intended to provide any recommendations or tax or legal advice. We encourage you to discuss your tax and legal needs with a qualified tax and/or legal professional.
1 “Indexed annuity sales set records in 3Q: Wink,” (accessed November 19, 2018).
2 “First and foremost, consumers buy annuities to create retirement income,”  (accessed November 19, 2018).