Since the onset of the Great Recession in 2008, analysts have watched the Federal Reserve keep interest rates at or just above zero percent. And,
significant rate increases do not appear to
be on the horizon. The last time the Fed
short-term rates were at zero, they stayed
there for more than 21 years. Although
markets show signs of recovery, the Fed
remains tepid and rates slow to rise.
Traditionally, low rates slow the sale of
interest-sensitive retirement products,
such as fixed indexed annuities. However, in recent years, this market has had
record sales. In fact, 2015 was the biggest
year to date, with more than $54.5 billion
in indexed annuities sales, a 13 percent
increase over 2014.
These numbers may show atypical
market behavior, but here are four reasons
FIAs are thriving today.
1) RELIABLE RESULTS
Studies indicate growing trend is fueled
by a retiring public looking for guaranteed
income. The LIMRA Secure Retirement
Institute’s research finds Americans’ top
financial goal is having enough money to
last through retirement. As more people
approach retirement and less pensions,
the more people we see turning to fixed
indexed annuities to alleviate concerns
and generate guaranteed income.
2) BOOMER MARKET BOOM
Currently, more than 10,000 boomers
retire every day. By 2025, 64 million
Americans will be retired. Additionally,
the Social Security Administration reports
rising longevity. Today’s 65 year old men
are expected to live to 84, women to 86.
One in 10 will live past 95. This means
more people, living longer, looking for
more financial security. Additionally,
with more than half of today’s Boomers
(50-59) interested in converting their
assets to guaranteed income, this annuity
trend shows no signs of slowing.
3) APPEALING LIFETIME
Low interest rates have also spurred
the proliferation of guaranteed lifetime
withdrawal benefit riders. For instance,
in the second quarter of 2015, Wink,
Inc., reported 58.7 percent of purchasers
elected to add one of these lifetime riders.
This product mix offers a strong combination of secure principal protection and
guaranteed lifelong income.
4) NEW AND INNOVATIVE
As annuity interests grow, so does the
necessity for innovation. In order to meet
the needs of an expanding variety of cli-
ents, insurance companies are developing
new crediting methods for their guaran-
teed lifetime withdrawal benefit riders to
help retirees choose the approach that’s
right for them.
In particular, a series of index-linked
lifetime income rider options have
emerged. Now clients can secure principal
protection and lifetime income benefits,
while retaining the possibility of higher
returns linked to various market crediting
This multi-pronged approach has broad
appeal with an untapped client base—
individuals who want principal protection,
guaranteed lifetime income and the
potential for higher payouts.
The Time is Right
Time is valuable. No one appreciates that
more than retirees. The fact of the matter
is, regardless of rates, a generation of
Americans is rapidly retiring. By waiting to time future interest rates or the
market, clients stand to lose value in a
fixed indexed annuity product available to
them right now.
4 reasons FIAs are thriving in a low interest rate market
SPONSORED CONTENT BY
By Kirby Wood
Kirby Wood is the Senior Vice President and
Chief Marketing Officer at American Equity
Investment Life Insurance Company. He can be
reached at firstname.lastname@example.org