The once-sleepy class of financial instruments offered by insurance companies has become a hotbed of growth and change. After two years of record sales fueled by high interest rates, stock market jitters and the silver tsunami of baby boomers heading into retirement, annuities are poised to take off in another direction — embedded in 401(k) plans.
According to the annuity industry organization Limra, total U.S. annuity sales reached a record $385.4 billion in 2023, up 23% from 2022, which set the previous record of $312.8 billion. That trend continued in the first quarter of 2024, when sales hit $113.5 billion, 21% above the results from the first quarter of 2023, Limra reported.
The 2023 boost is due largely to independent agents and broker-dealers, whose sales collectively increased 29% and represented 41% of 2023 sales, according to Limra.
“Rising interest rates have made annuities very attractive to a larger group of investors who are served by independent advisors and broker dealers,” says Bryan Hodgens, head of Limra research.
Although annuity sales have skyrocketed in the past two years, proponents have lamented that relatively few people choose them even though surveys have consistently shown that they offer the features retirees want.
“We have this huge disconnect,” says Jason Fichtner, chief economist at the Bipartisan Policy Center and executive director of ALI’s Retirement Income Institute.
“If we talk to people … first we say, ‘Would you like to make sure that you don’t outlive your savings?’ They say, ‘Oh, I’d love that.’ If we say, ‘Would you like to have your own personal pension and get a paycheck for life?’ ‘Oh, I’d love that.’ ‘Would you like an annuity?’ ‘No, I don’t want one of those.’ And we just described what they wanted.”
