A new LIMRA report highlights the growing trend of Americans utilizing permanent life insurance policies and annuities to help them achieve financial security in retirement.
The report showed that while term life insurance has gained in popularity, the majority of life insurance purchases are for permanent insurance. It also pointed out that contrary to common opinion, permanent policies are not just for the wealthy. In fact, more than 71 percent of all permanent life insurance policies issued in 2013 were for those who make less than $100,000 a year.
There are many reason consumers purchase life insurance policies. The top five reasons for owning life insurance according to the 2016 LIMRA Insurance Barometer Study are:
- Burial and final expenses
- Leave an inheritance
- Replace lost income
- Pay off mortgage
- Pay off home expense
Regardless of the type of life insurance, 86 percent of Americans believe that most people should have life insurance.
Annuities are another product people buy to feel financially secure in retirement. Many annuity owners utilize the guaranteed lifetime withdrawals, which helps them afford a comfortable retirement. Eighty percent of new variable annuity business is sold with a guaranteed living benefit.
Any change in the ability to accumulate income on a tax-deferred basis could have serious consequences in the annuities marketplace. Some of these include:
- a reduction in future tax revenues due to slower account growth rates,
- increased fees on annuities which could yield reduced sales and tax revenues, and
- some of the guarantee features becoming worth less due to excessive withdrawals to pay taxes.
As the need for retirement savings and income grow, exploring options other than Social Security becomes more and more important. LIMRA members can read the full report, The Facts of Life and Annuities, to learn more about life insurance and annuities.