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Change is Coming for Fixed Indexed Annuity Industry


Since fixed indexed annuity products celebrated their 20th birthday last year, LifeHealthPro’s Peggy Bresnick looked into what we can expect from these annuities going forward in the article “What does the future hold for FIAs?” Their original purpose hasn’t changed much. FIAs were introduced to give retirees a reliable and secure source of income, something that consumers are still searching for in 2016. Sales have grown significantly since then and are forecasted to continue growing into the future. Last year, first quarter sales of indexed annuities were $11.6 billion. Younger consumers are showing interest in fixed indexed annuities, prompting companies to develop new products to meet their needs and keep demand high. The Indexed Annuity Leadership Council (IALC) predicts that three large changes will come to the indexed annuity industry.

The first prediction from the IALC is that the fixed indexed annuity customer is going to change. Baby Boomers have been the biggest supporters of indexed annuity products to date because they are trying to plan for a comfortable retirement by creating a lifetime income stream. They were the first generation where a significant number of workers didn’t have a company pension upon retirement. Baby Boomers have also lived through large cost of living increases. Now that the younger generations have witnessed the Great Recession and seen their parents and grandparents struggle financially in retirement, fixed indexed annuities are appealing to these younger generations as well. This includes Generation X, Generation Y and even the young Millennials. There will be a younger generation of consumers purchasing indexed annuities in the future.

Secondly, fixed indexed annuity products are going to change. There have already been many changes over the past two decades, but there will be a lot more coming soon. Changes in the age of customers means that demand is changing as well. Companies are developing new products and tweaking existing FIAs to better meet the needs of these new customers. People are looking for more flexibility and a greater choice of indices when it comes to their fixed indexed annuities.

Perhaps the best news for the industry overall is that indexed annuities will become much more well known by consumers. Many large companies who used to offer defined pension plans have started offering defined contribution plans instead over the last couple of decades. Only 24% of Fortune 500 companies offer pensions to their new hires anymore, a number that is down from 60% in less than 20 years. Fixed indexed annuities can use your personal retirement savings to create an income stream similar to that of a pension. Some companies even offer annuity choices for their 401k participants to create income using some of those savings. People are becoming increasingly aware of their retirement financing options out of necessity. As this knowledge continues to spread, more consumers will know about the benefits provided by fixed indexed annuities.

Written by Rachel Summit

Follow Rachel, aka Finance Mama, on Twitter and Google+


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