What You Need to Know

  • The government is confusing.
  • Stock market gains are high, for now.
  • The Secure Act is turning employer-sponsored retirement plans into income-planning educators.

Have you ever experienced the solution to a problem being in plain sight, only to pass over it? The time for consumers to notice the obvious is coming for annuity products in 2022.

This will be the year that consumers proactively seek information and advice to explore the solutions that annuity products can provide, to address some of their financial challenges. The stars are fully in alignment, and a number of forces are driving increased interest in annuities.

One of the major criticisms of the annuity industry is that is has lacked a national, industry-funded advertising campaign aimed at educating consumers about the value of annuities. In recent years there have been several well-done national efforts, funded by certain life insurance companies and some trade organizations, that have promoted the value of annuity products.

In 2022, a confluence of demographic, regulatory and economic forces will spur a mammoth annuity awareness campaign.

Here are some of the new awareness campaign drivers.

1. The large number of people in or nearing retirement age.

In fact, as our society ages, by 2024 we will reach “Peak 65.” This is the point in time when more Americans will turn age 65 than at any point in history, and the time they will likely end full-time work. These aging individuals have reached the pinnacle of the savings mountain and are looking to convert their accumulated nest eggs into income to fund their expected life span.

2. Provisions of the Secure Act requiring 401(k) and similar defined contribution workplace retirement plans to provide income estimates.

These provisions — which will require plans to send out notices referred to as “lifetime income illustrations” — will offer savers “a realistic illustration of how much monthly retirement income they could expect to purchase with their account balance,” according to the rule.

These income disclosures will, for the first time, highlight the importance of lifetime income to over 600,000 plans and 60 million people who participate in 401(k) plans.

Participants will be introduced to the lesson that it is the income your savings will generate that is most important as you prepare for retirement. These disclosures will likely raise many questions and drive expanded education on saving, investment and lifetime income.

3. Moves by certain 401(k) administrators to make annuity income options available to their plan participants.

The impact of these Secure Act-buoyed annuitization option efforts cannot be underestimated. They should create significant interest and the need for education in generating lifetime income and the value of annuity products.

4. The growing awareness of most people under age 55 that they need new lifetime income sources.

Younger workers are now realizing their age cohort will not benefit from the pension plans that older workers now possess. They know that they need lifetime income, and that their employers will not provide it.

5. The continued low-interest-rate environment.

Low yields on bonds and other fixed income arrangements have upended the conventional 60/40 portfolio allocation.

That shift is requiring that people save more to create the income streams needed to fund longer life expectancies and to look for new sources of income. Many consumers also like the psychological comfort that protected lifetime income offers.

6. The need to protect stock market gains.

With the significant increase in equity markets over the last few years, many savers have equity market gains they want to protect. The principal protection offered by most annuity products provides this.

7. The overall uncertainty we are facing each day with our government, infections and way of life.

We are now entering the third year of a worldwide pandemic that has upended our work, family and relaxation routines. Our federal government has been dysfunctional, constantly creating stress and anxiety for citizens. The comfort of protected lifetime income helps us deal with the chaos we are all experiencing.

The Takeaway

As our society continues to age, annuities are one of the only financial products that provide the features and benefits needed to provide guaranteed protected income options to pay for the costs of lengthening life spans.

Consumers are awakening to this fact. 2022 should be a great year for product discovery and sales.