Annuity Owners Are Often Middle Class

Middle-Class Americans Are Drawn to Annuities
The Gallup survey, released this August, found that 70% of individual annuity owners have household incomes that fall below $100,000 and 25% that fall below $50,000.
The median income for an annuity owner in 2022 was $79,000. While past years have seen similar figures, the median income was $96,000 in 2001. Annuity owners continue to be in their 60s and 70s and retired.

Part of the middle class’s attraction to annuities may lie in how annuity owners fund the product. The study found that, while 54% of buyers do fund an annuity through their savings, 40% do so through their or their spouse’s current income.

Additionally, 35% of people funded their annuity with an inheritance, 17% with the sale of a property or business and 10% with a bonus from their employer.

The main factor attracting middle-class Americans, along with buyers from other income brackets, to annuities is the security that they offer during retirement.
According to the survey, 88% of buyers purchased an annuity to achieve peace of mind in retirement, while 81% said their main motivation was to generate retirement income.

The conservative and low-risk aspect of annuities also attracted buyers, with 74% saying they purchased an annuity as financial protection against other investments failing or rapid inflation. Additionally, 89% of buyers ranked an annuity being a safe investment as the most important reason for their purchase.

Annuity owners also tend to be financially savvy and feel like they are strongly equipped for their golden years. The survey found that 93% of individual annuity owners are confident in how well they have prepared for retirement.

Buyer’s Plans for Distributions Are Changing
One result consistent with previous findings is that very few annuity owners expect to take their payments in a lump sum. The survey found that 87% of buyers plan to either take their distributions in a series of payments or only withdraw money for an emergency.

A significant change from Gallup’s previous annuity survey released in 2013 is how many owners are already taking distributions from their annuities.

In 2013, just 37% of owners had withdrawn money from an existing annuity. In the updated survey, that figure jumped to 53%. While annuities are most often used to guarantee income in retirement, 20% of owners who are still in the workforce have begun to take distributions.

Despite the significant uptick in distributions taken and the number of people withdrawing while still in the workforce, the median age to begin taking distributions has actually risen in the last decade, from 65 in 2013 to 67 today.

Source

https://www.annuity.org/2023/09/16/annuity-owners-often-middle-class-new-survey/