Retirement savers eye guaranteed lifetime income amid recession fears

Retirement savers eye guaranteed lifetime income amid recession fears

  • Demand for annuities rose amid worries about the economy and the possibility of a recession.
  • Today, more than half of retirement savers are considering some type of guaranteed income for life, according to a recent report.
  • Fund managers are rolling out new options to help workers reach retirement with a stable source of income for life.

Amid worries about the US economy and the possibility of a recession, most retirement savers want some sort of assurance that they won’t outlive their nest eggs, according to recent reports.

As a result, demand for annuities, which provide a guaranteed monthly income stream like Social Security and pensions, has skyrocketed.

Today, more than half, or 54%, of retirement savers are considering some form of guaranteed income for life, according to a new survey by Morning Consult for the American Council of Life Insurers, or ACLI.

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“Retirement savers are clearly concerned about inflation and the overall economy,” said ACLI President and CEO Susan Neely.

The passage of the Secure Act also made it easier for employers to offer annuities as a retirement savings plan option.

Going forward, insurance companies, asset managers, and employers are working to make these guaranteed lifetime income options more widely available through 401(k) and other defined contribution plans.

Starting in the fall, Fidelity will allow plan members to convert a portion of their retirement savings into an immediate income annuity to provide pension-like payments throughout retirement.

Fidelity Investments is the nation’s largest provider of 401(k) plans. The financial services company manages more than 35 million retirement accounts in total.

BlackRock and State Street Global Advisors, two of the biggest asset managers, also announced target date funds with retirement annuity options.

“As Americans live longer and healthier lives, their risk of outliving their savings is accelerating the ‘silent crisis’ of financial insecurity in retirement,” BlackRock chief client officer Mark McCombe said in a statement. communicated.

Having an annuity option at retirement is a good thing.

Caroline McClanahan

founder of Life Planning Partners

“Having an annuity option in retirement is great for people who don’t feel confident,” said Carolyn McClanahan, certified financial planner and founder of Jacksonville, Fla.-based Life Planning Partners.

But with any annuity, be sure to compare offers and fees, added McClanahan, who is also a CNBC advisory board member.

Annuity sales hit a record high in the first quarter of 2023, up about 50% from a year ago, according to Limra, an insurance industry trade group.

According to Todd Giesing, assistant vice president of annuity research at LIMRA, the annuity market has benefited from market volatility, concerns about the banking sector and a potential recession, as well as higher interest rates. high, which generally results in a better return on investment for insurers. .

“Certainly annuity payouts are so much more attractive now,” said Keri Dogan, senior vice president of retirement solutions at Fidelity.

Dogan said she expects interest in annuities to continue to grow “because you get so much more for your money.”

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