LIMRA SRI wanted to take a closer look at those who debated buying annuities but decided not to purchase and find out why. This most recent study looks at investors who had a discussion with their advisors about deferred annuities within the past 3 years but then decided not to buy. The research found the consumers who didn’t purchase fit into three categories:
- More than 4 in 10 consumers say they would be open to buying an annuity
- Four in ten consumers who think annuities are good but just not for them
- Less than 2 in 10 consumers say they would most likely never buy an annuity
Forty-two percent of consumers who didn’t purchase were open to the idea of annuities. They feel annuities are good products and would consider purchasing in the future. The top reason for not buying annuities for this group was that it wasn’t the right time (44%). Nearly two-thirds of this segment is not retired and only 3 in 10 of the non-retirees plan to retire in the next 10 years. Also within this group of consumers, 61 percent say having enough money to last through retirement years is their single most important objective for their assets in retirement.
On the opposite side of the spectrum, 18 percent of those who didn’t buy an annuity would most likely never own one. They most identified with the statement they do not like annuities and would likely never consider buying one. About half of this group is already retired and one-third plan to retire in the next 4 years. Another characteristic of this group is they give the highest importance on control over how investments are managed and are more likely to have guaranteed income through their pensions, which is not the case with younger workers.
Prior research shows retiree annuity owners feel more confident that they are more likely to afford their preferred retirement lifestyles – even if they live to age 90 or older – than retirees who do not own an annuity. Seventy-three percent of retirees who own an annuity believe they will be able to live the retirement lifestyle they want, compared to just 64 percent of retirees who don’t own annuities. Additionally, 69 percent of retirees who own an annuity are more confident that their savings and investments will not run out if they live to age 90, compared with 57 percent of retirees who don’t own an annuity.
What does this mean for advisors?
This research shows that most consumers who didn’t buy an annuity are open to possibly buying them in the future, especially if they are younger and still working. Possibly a follow up conversation down the road and additional education could help the consumer with the decision to purchase.