Why Fixed-Rate Deferred Annuity Sales Skyrocketed
By: Bryan Hodgens AIF? Head of Research, LIMRA
April 2024
Over the past few years, Americans have endured a pandemic, soaring inflation and predictions about a possible recession — all of which would unnerve most investors. During that time, the equities markets experienced double-digit swings — up more than 20 percent in 2021, losing all those gains in 2022 and rebounding in 2023. For those approaching retirement, this volatility can be nerve-wracking because trying to time the market is frequently unsuccessful, and the idea of losing a significant portion of their nest egg would be unsettling.
?Yet, with record-high inflation, investors need their assets to grow to maintain their buying power. Until 2022, interest rates were so low that traditional products offering principal protection were not viable for that goal. With the Federal Reserve increasing interest rates to their highest levels in 15 years, recently overlooked products have become very attractive.
?Fixed-Rate Deferred Annuities: The Right Product for the Moment
?In January, LIMRA announced preliminary fixed-rate deferred (FRD) annuity sales were $58.5 billion in the fourth quarter, 52 percent higher than fourth quarter 2022 sales and 10 percent higher than the total annual FRD annuity sales in 2021.
For the year, FRD annuity sales totaled $164.9 billion, up 46 percent from the record set in 2022, and more than triple the 2021 sales results ($53.1 billion).
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Figure 1. Fixed-Rate Deferred Sales Trend
Sales in Billions of Dollars
Rising interest rates, continued equity market volatility, competitive FRD annuity crediting rates and a growing demand for products that protect investment principal while offering guaranteed growth helped fuel the tremendous gains in the FRD annuity market.
The increases in interest rates allowed insurers to...
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Join: Industry Insights With Bryan Hodgens: Are In-Plan Annuities at a Tipping Point? on Tuesday, May 21 at 2:00 p.m. ET.
Financial Services Professional. We Educate people about financial concepts and how money works. Notary Public
6 个月Well said!
Digital Marketing, Brand and Technology Executive/Consultant
6 个月My investors always steered me away for getting an annuity. I wish I didnt listen to them 15 years ago.
Experienced Writer | Social Media | Helping Others and Crafting Engaging Content
6 个月Very interesting!