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withdrawn money from an existing annuity.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/
