I have seen the demand for annuities grow stronger and stronger over the past couple of decades. When I talk about this with colleagues in the annuity industry, they think I am being facetious. What? You haven’t seen the same? Well, let me show you about the demand for annuities from my own perspective.
The United States is in a retirement crisis. For the next 10 years there will be an average of 10,000 people turning 65 each day.1 It turns out those baby boomers are really earning their title as “the greatest generation!” Look forward to more retirement communities and nursing homes in a neighborhood near you!
In a recent survey, 57 percent of respondents had less than $1,000 in savings.2 And I thought I was running behind on my saving for retirement! Someone wise once told me that you should always have at least three months’ salary saved in your savings account. And that sage advice puts me ahead of nearly three-fifths of Americans? That’s plain crazy.
Approximately one in four Americans aged 65 and older relies on Social Security for 90 percent of their family income.3 I am certain a career in financial services has swayed my knowledge of this topic. If I am not working with someone asking about annuities, it is someone talking to me about using life insurance to subsidize their retirement income. Yet, I know that early in my career someone told me that Social Security is only intended to provide for 40 percent of your retirement income. That said, it appears that most Americans have never heard that (and therefore, are not prepared for it), or they haven’t the ability to prepare for this despite having this knowledge.
The 2014 report from the Social Security program trustees indicates that the trust fund reserves will fall to a point that Social Security will not be able to pay full retirement benefits starting in just 13 more years.3 This is what everyone is bellyaching about—“I’ve paid in for [X] years, and they aren’t going to give it back to me?” I don’t know about you but, as a woman in her mid-40s, I feel a little lied to in respect to this. I’ve been paying into Social Security for more than 30 years. I get those statements from the Social Security Administration each year telling me what my estimated Social Security check is supposed to be. So, I’m potentially going from about $2,000 per month for the rest of my life (as of today) to absolutely nothing in retirement? That is certainly going to put a dent in my plans to run off to Sweden in 15 years.
The top fear of Americans is running out of money in retirement.4 In fact, this phobia is greater than the fear of death or public speaking! While this made me laugh (because I love the attention of speaking in front of a crowd!), it makes perfect sense. For those who are 65 today, a man has a three percent chance of living to 100, a woman a 5.9 percent chance, and at least one member of a couple an 8.7 percent chance. These percentages rise over time, so the comparable numbers for someone age 25 today are 6.1 percent, 10.2 percent, and 15.7 percent, respectively.5 Now, those statistics may seem relatively insignificant, but if you are part of the three percent that is scary as all get out.
And while most consumers do not know that annuities are the only financial services product that can guarantee a minimum income amount for the rest of the purchaser’s life, they do know that they need some kind of help navigating retirement. In fact, 90 percent of boomers believe an important function of their financial professional was to “ensure the safety of a significant part of my nest egg.”6 Another 84 percent said their financial professional should “make sure I have adequate and guaranteed income for life.”6
So, like I said, the wares in your toolbox are highly sought after by your prospects. Americans are demanding annuities! There is just one problem—they hate the word “annuity.” In a recent survey, 35 percent of respondents would be less interested in an annuity that offers guaranteed lifetime income, as compared to an unnamed product that offers guaranteed lifetime income.7 So really the objection isn’t the product, it is how you frame it. If you describe what the annuity does, rather than what it is, you are likely to receive a much warmer response. If you can listen to your prospects’ concerns, and provide feedback indicating that you have an instrument that can offer them a lifetime of guaranteed income, you are meeting the demands of the masses. Go forth, educate, and the sales will come.
- Pew Research Center.
- 2017 GOBankingRates survey.
- Social Security Administration.
- New Generation Ahead Study, Allianz Life 2017.
- U.S. Social Security Administration, Office of the Chief Actuary.
- Reclaiming the Future Study, Allianz Life 2016.
- Fifth annual Guaranteed Lifetime Income Study, Greenwald & Associates.