Displaying items by tag: annuities

President Biden signed the $1.9 trillion American Relief Act of 2025, ensuring government operations through March 14 but excluding life and annuity provisions.

 The legislation may push financial services advocates to focus on standalone bills, like Secure 3.0, rather than relying on broad spending packages. With the debt ceiling still in place, Congress faces another deadline this summer, creating additional opportunities for policy negotiations. 

The package reflects a shift toward separating unrelated provisions from critical bills, as seen in recent debates. These trends could reshape how financial services policies are introduced and passed moving forward.

Finsum: We’ll see a lot of potential changes that could directly or indirectly affect annuities in Trumps first 90 days, so keep your eyes peeled for regulatory changes. 

The Fed’s recent rate cuts are reshaping the landscape for fixed annuities, bringing both challenges and opportunities for investors. Fixed annuities, which offer guaranteed returns unaffected by market fluctuations, remain steady for existing contracts but may see reduced rates for new purchases in a lower-rate environment. 

This could lead less risk-averse investors to consider alternatives like variable annuities or registered index-linked annuities for potentially higher returns. Despite these shifts, the core appeal of fixed annuities—income guarantees and stability—remains intact, making them valuable for conservative financial strategies. 

Rate cuts, while altering some dynamics, do not diminish their long-term benefits, such as tax deferral and customization for individual goals. 

Finsum: Advisors need to be aware of how the different annuity structure is affected by the various interest rates cycles, in order to serve clients. 

U.S. annuity sales remained robust in 2023, but life insurers struggled to grow their share of the retirement asset market. Annuity reserves held by life insurers rose 8.9% to $4.2 trillion, slightly lagging the 9% growth rate for total retirement assets. 

Employer-sponsored pension and retirement plans saw a 10.3% increase, reaching $13 trillion, while individual retirement account (IRA) assets grew 13.4% to $13.6 trillion. Annuities maintained a 9.3% share of total retirement assets, unchanged from 2022, despite record sales and strong investment returns.

 IRA assets allocated to annuities grew 9.6% to $614 billion, but their share within IRAs declined to 4.5% due to even greater growth in mutual funds and other investments. 

Finsum: Overall, we believe annuities will continue to play a stable yet relatively modest role in the broader retirement landscape.

Category: Annuities

Tags: annuities, fixed annuities, variable annuities

Annuities in IRAs can provide surprising benefits for required minimum distributions (RMDs), particularly with fixed index annuities (FIAs) or variable annuities (VAs). 

While annuities often draw criticism for fees and opaque structures, they can sometimes be the best tool for specific retirement planning needs. FIAs, despite their bond-like returns with added stock beta, can offer secure lifetime income to meet critical retirement cash flow needs. 

When paired with goals-based planning, annuities excel in providing inflation-hedged, lifetime income that’s challenging to replicate with other investments. For flexible retirement expenses and longevity protection, the mortality pooling aspect of annuities often delivers payouts surpassing self-built solutions. 

Finsum: While not without flaws, annuities can play a crucial role in comprehensive retirement planning strategies.

Annuities have long been seen as one of the financial world’s most perplexing instruments, puzzling both retirees and economists alike. While economic models suggest that annuities should be a cornerstone of retirement planning due to their ability to provide lifelong income and protect against outliving savings, actual adoption rates have historically been low. 

Recently, however, there has been a notable rise in annuity sales, particularly for fixed products, which offer guaranteed returns and shield investors from market volatility. This shift may stem from concerns over Social Security’s future, the allure of secure income in uncertain times, and a growing desire among retirees to balance spending confidence with preserving wealth. 

Over time, the annuity landscape has expanded into a spectrum of offerings, including fixed, variable, and hybrid products, tailored to meet varying financial goals and preferences. 

Finsum: As these products gain prominence, they demand a deeper understanding from advisors guiding clients through estate and retirement planning.