An annuity is a financial product that provides a guaranteed income stream for a set period of time, typically for the life of the annuitant. Annuities have traditionally been sold to individuals as a way to provide a source of income in retirement, but in recent years, there has been a growing demand for annuities within employer-sponsored retirement plans.
According to a new report from LIMRA, demand for annuities within employer-sponsored retirement plans is expected to “grow exponentially” in the next two years. This is due to a number of factors, including:
· The current economic environment;
· The retirement income needs of baby boomers; and
· The desire for guaranteed income streams.
The Need for Retirement Income is Real
The LIMRA report predicts that this demand will continue to grow in the coming years, as more and more baby boomers reach retirement age and begin looking for ways to supplement their retirement income.
The report also notes that the current economic environment, which has been characterized by low interest rates and high market volatility, has made it difficult for many retirees to generate sufficient income from their retirement savings.
As a result, more employers are looking to offer annuities within their retirement plans as a way to help employees secure a reliable source of retirement income. According to the report, 30% of employers currently offer annuities within their retirement plans, and this number is expected to grow significantly in the coming years.
Different Types of Annuities
There are several different types of annuities that can be offered within employer-sponsored retirement plans, including fixed annuities, variable annuities, and indexed annuities. Each type of annuity has its own unique set of features and benefits, and employers will need to carefully consider which type of annuity is best suited for their employees.
One potential benefit of offering annuities within retirement plans is that they can help to reduce the risk of running out of money in retirement. Because annuities provide a guaranteed income stream, they can help to ensure that retirees have a stable source of income throughout their retirement years, even if they live longer than expected.
Potential Drawbacks Too
While annuities can offer a reliable source of retirement income, it’s important to consider potential drawbacks, especially when considering adding them within employer-sponsored retirement plans.
At West Advisory Group, we’ve developed our signature process, the PEAK FORMula, to handle all the ebbs and flows of retirement life. With our extensive experience, we’ve seen it all, and we’ve realized that while we can’t control every aspect of retirement, mastering the elements we can control is crucial.
Our team of experts at West Advisory Group is perfectly matched to assist those within five years of retirement, transitioning from the accumulation phase of their working life to the distribution phase of retirement. We understand the complexities of annuities and can help you navigate whether they make sense for your retirement plan.
It’s important to acknowledge that annuities can be complex products, and employees may not fully understand how they work or their benefits in their employer-sponsored plan.
Additionally, some annuities can be expensive, with high fees and commissions. However, as employers and employees alike seek ways to secure a reliable source of retirement income, annuities may become an increasingly popular option.
With West Advisory Group by your side, you can make informed decisions about your retirement plan. Let us help you determine whether annuities align with your financial goals and provide you with the peace of mind you deserve in retirement.
