Annuities Make a Comeback in Retirement Savings
Annuities are growing in popularity, thanks mainly to retirees’ desire for guaranteed returns in the face of growing lifespans and uncertain markets, writes Financial Advisor magazine.
In the wake of 2008 — a disaster from which many investors haven’t recovered, despite a sharp run-up in stock values since early 2009 — people approaching retirement “are no longer willing to gamble in the market,” Elizabeth Ruch, an advisor with Waddell & Reed in San Diego, tells Financial Advisor. Instead, she says, they want some sort of guarantee, along with a way to get in on market growth.
Enter annuities to assume a place — along with traditional investments and Social Security — in the retirement arsenals of millionaires-next-door. There, they play a stabilizing role once filled by defined-benefit pensions.
But insurers, stung by pre-2008 principal-protection guarantees and hobbled since then by low returns on their fixed-income investments, are less generous these days with annuity payouts. Some, including Hartford and Sun Life, have ditched annuities altogether.
Other companies seem to have renewed their commitment to the products, however. These players “have widened product lines and are rolling out different variations of annuities,” such as deferred-income and fixed-indexed annuities, according to Financial Advisor.