Throughout 2022 there has been an increase in the sale of annuities due to volatility in the equities markets and increasing interest rates. According to the Life Insurance Marketing and Research Association, (LIMRA), in 2022 total U.S. annuity sales hit $310.6 billion, a 23% increase over 2021 and 15% higher than the sales record set in 2008.
Turning To Annuities
According to the U.S. Department of Health and Human Services, by the year 2040, 80 million Americans will be over the age of 65. What is driving the increase in annuity sales is investors' desire to protect their retirement income streams in the face of these headwinds:
- Inflation: According to the Consumer Price Index, inflation during 2022 hit a 40-year high, reaching 9.1% in June 2022.
- Rising energy prices: Energy prices spiked during 2022 due to Russia's invasion of Ukraine in February 2023.
- Rising interest rates: Since March 2022, the Federal Reserve has raised the Federal Funds Rate from 0.25% to 5.25%, which in turn has decreased the valuation of bonds.
For details on the various types of annuities see “Best Annuities For Reliable Income.”
- Fixed annuities: In 2022, sales reached $208 billion, a 60% increase from 2021. Of that $208 billion, fixed-rate deferred annuities were the largest component at $112.1 billion.
- Variable annuities: Total U.S. sales reached $102.6 billion in 2022, down 18% from $125.3 billion in 2021; the largest contributor was traditional variable annuities at $61.7 billion.
Are Annuities Good For You?
The answer depends on your particular circumstances. They are a good choice for those who:
- Want a guaranteed rate of return that is higher than that offered by a bank CD.
- Want a reliable income stream during retirement.
- Who fear running out of funds during retirement.
- Have received a lump sum structured settlement.
- Want to defer taxes on investment earnings.
Source https://www.forbes.com/sites/investor-hub/article/best-annuities-for-2023
