Several major financial institutions in the US are addressing the issue of Americans potentially outliving their retirement savings. Fidelity, the country's primary 401(k) plan provider, plans to allow individuals to convert a portion of their retirement savings into an annuity that would offer lifelong pension-like payments starting this autumn. BlackRock and State Street Global Advisors, two of the most prominent asset managers, have also revealed plans to introduce target-date funds that include options for retirement income annuities.
“As Americans are living longer and healthier lives, their risk of outliving their savings is accelerating the ‘silent crises of financial insecurity in retirement,” Mark McCombe, BlackRock’s chief client officer, said in a statement.
The Employee Benefits Research Institute found that many employees desire a form of consistent monthly income during retirement to prevent the possibility of outliving their funds. Furthermore, the approval of Secure Act has streamlined the inclusion of annuities as one retirement savings plan option for employers.
Amid fears of a potential recession and unease about the state of the US economy, the popularity of annuities has been increasing.
The Limra, a trade organization for the insurance industry, reported that the sales of annuities reached an unprecedented level last year. Initial projections indicate that the first quarter of 2023 may also witness record-breaking sales figures.
The increased interest rates have been advantageous for annuities, as insurers can offer higher investment returns. “Certainly, annuity pay-outs are so much more attractive now,” said Keri Dogan, senior vice-president of retirement solutions at Fidelity.
Dogan said she expects the interest in annuities will continue to grow “because you get so much more for your money.”
