The variable annuity market is showing signs of growth, according to new data from the Insured Retirement Institute (IRI). This is in stark contrast to recent trends in the industry, which had seen variable annuities steadily declining, but that was not the case this past quarter where they increased by 12% from the previous quarter and even beat out fixed annuities by 2 percentage points, according to the financial magazine FA-Mag.com.
“It makes sense,” says Andy Barnett of Sarasota, FL-based Global Financial Private Capital. “The positive trend in VAs will continue as long as the market keeps going up.”
It’s also believed the current low interest rates could be a contributing factor as well. With more and more Baby Boomers hitting retirement age every day, they’re looking to increase their returns and better secure their futures.
For “Baby Boomers who are entering their retirement years, [VAs] can deliver upside with a guarantee unlike any other product,” notes Joe Heider at Cirrus Wealth Management in Cleveland, OH.
Variable annuities are especially attractive to many in retirement age because of the safety of their guaranteed income and the fact that they typically charge lower fees (around 2%) than other types of annuities. It’s this rising demand for variable annuities that many in the industry believe will result in changes to the industry that will bring about more innovation and improvements. Avoiding taxes, trading costs, and ticket charges are just some of the reasons investors turn to what’s known as investment-only variable annuities (IOVA).
One company in particular that’s started to lead the way in this changing market is Lincoln Financial. They recently released a new living-benefit rider called Market Select Advantage. Market Select Advantage provides guaranteed income for life and the opportunity to balance a investment portfolio with options from across the financial field.
As people, especially those in or nearing retirement age, continue to try and figure out how best to invest their money in a post-Great Recession world, it’s likely that variable annuities in some form or another will continue to be one of the most popular options chosen.