June is Annuity Awareness Month, which highlights the only financial product in the marketplace that offers savers guaranteed income for life.
By some measures, annuities are already in the spotlight. Annuity sales in the United States set records in 2022 and again in 2023. And according to LIMRA, sales in the first quarter of 2024 were 21% higher than last year.
Americans are increasingly turning to annuities at a time when fewer and fewer workers have access to traditional pension benefits from their employers. With an annuity, an employee can plan on having their own secure income stream just like a traditional workplace pension.
The U.S. Congress recognized the importance of annuities in retirement planning, overwhelmingly passing legislation in 2019 and 2022 that made it easier for workers to access guaranteed lifetime income as part of retirement savings plans.
As popular as annuities are, however, they remain misunderstood by many people. Indeed, 50% of people in a Morning Consult survey for ACLI were not familiar with a guaranteed lifetime income product that pays out like a pension. An American College of Financial Services survey asked people questions about 12 financial topics. Respondents were least knowledgeable about annuities – and it wasn’t even close.
Hence the importance of Annuity Awareness Month. And the timing couldn’t be more critical.
More than 4 million people in the United States will be turning 65 every year through 2027, the largest wave of retirement-age Americans in the nation’s history. Many of them won’t have a traditional pension and will be responsible for managing their own retirement funds. According to the Alliance of Lifetime Income, 60% of American households could enter retirement with Social Security as their only means of protected income.
That’s where annuities come in. Along with Social Security, retirees use the steady cashflow from annuities to address their monthly income needs.
There are several types of annuities, with a variety of options for consumers. Many middle-income savers work with financial professionals to customize the right annuity to meet their individual needs and expectations.
The median income for an annuity owner is $76,000. It is vitally important that all Americans continue to have access to information from financial professionals about all of their savings options, including annuities.
(To learn more about annuities, join me during ACLI’s LinkedIn Live conversation on Friday, June 7, from 1-1:30 p.m. ET.)
Kathleen Coulombe serves as the Senior Vice President, Federal Relations, for the American Council of Life Insurers (ACLI). In this capacity, she is actively involved in a multitude of public policy issues on Capitol Hill that impact the life insurance industry.
