Displaying items by tag: variable annuities
Variable Annuities Rebound in 2024
Total annuity sales reached a record $432.4 billion in 2024, marking a 12% increase from the previous year and the third consecutive year of growth. Despite strong overall performance, declining interest rates in late 2024 led to a 13% drop in fixed-rate deferred and income annuities, as investors shifted toward products with higher growth potential.
Traditional variable annuities saw their first annual increase in three years, rising 19% to $61.2 billion, fueled by strong equity markets and product innovation. Experts anticipate continued strength in annuity sales for 2025, and variable annuities could have another positive year’s annuities.
LIMRA attributes this sustained demand to growing consumer interest in investment protection and guaranteed retirement income. Final industry rankings for 2024 will be released in March after earnings reports are completed.
Finsum: This could be the play for income investors worried about rising rates but need some upside exposure in 2025.
Variable Annuities Can Offer Unparalleled Flexibility
Protective Aspirations variable annuity offers clients flexibility and guaranteed lifetime income, addressing retirement concerns like market volatility, healthcare costs, and evolving financial needs. With features like SecurePay Protector, it enables higher early retirement income, while also adapting to unforeseen challenges.
The single-age withdrawal rates stand out, allowing retirees to maximize value based on their exact retirement age rather than broad age bands. For healthcare, the SecurePay NH benefit provides additional income during nursing home stays without impacting lifetime guarantees.
Protective’s focus on customization and strong guarantees ensures financial professionals can build tailored strategies for long-term stability and adaptability.
Finsum: Variable annuities offer an appealing solution for those who want a little more flexibility in their annuity options for 2025
Annuities Having a Hard Time Keeping Pace
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 Can Be Amplified By IRAs
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.
Three Great Variable Annuities to Take You Through the Fall
A variable annuity offers the potential for investment growth along with tax deferral, but at a higher cost compared to fixed annuities. With variable annuities, you can invest in subaccounts like mutual funds, and when ready, convert the balance into income payments.
While the returns and income depend on investment performance, many insurers guarantee a minimum payout. However, these annuities often come with high fees and restrictions on early withdrawals. The best variable annuities have low fees, flexible withdrawal options, income guarantees, and are backed by financially strong companies. Here are three of the best options in the current market:
- Lincoln Financials’ American Legacy Target Date Annuity, Annual Fee 0.10% to 0.90%
- Pacific Life’s Pacific Odyssey Variable Annuity, Annual Fee 0.30%
- RiverSource RAVA Vista Variable Annuity, Annual Fee 1.00%
Finsum: There is currently more value in annuities than there was a decade ago due to the risk levels compared to bond markets and the return profile.