As a result, demand for annuities, which offer a guaranteed stream of monthly income like Social Security and pensions, has soared.
Now, more than half, or 54%, of retirement savers are considering a type of guaranteed lifetime income, according to a new survey by Morning Consult for the American Council of Life Insurers, or ACLI.
“Retirement savers are clearly concerned about inflation and the overall economy,” said Susan Neely, ACLI’s president and CEO.
The passage of the Secure Act also made it easier for employers to offer annuities as one retirement savings plan option.
Going forward, insurance companies, asset managers and employers are moving toward making these guaranteed lifetime income options more broadly available through 401(k) and other defined contribution plans.
Starting in the fall, Fidelity will let plan participants convert some of their retirement savings into an immediate income annuity to provide pension-like payments throughout retirement.
BlackRock and State Street Global Advisors, two of the largest asset managers, also announced target-date funds with retirement income annuity options.
“As Americans are living longer and healthier lives, their risk of outliving their savings is accelerating the ‘silent crisis’ of financial insecurity in retirement,” Mark McCombe, BlackRock’s chief client officer, said in a statement.
“Having an annuity option when you retire is a good thing for people who are not feeling confident,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners, based in Jacksonville, Florida.
But with any annuity, make sure you are comparing the offerings and the fees, added McClanahan, who also is a member of CNBC’s Advisor Council.
Annuity sales hit an all-time high in the first quarter of 2023, up roughly 50% from a year ago, according to Limra, an insurance industry trade group.
The annuity market has benefited from market volatility, concerns about the banking sector and a potential recession, as well as higher interest rates, which generally translate to insurers paying a better return on investment, according to Todd Giesing, assistant vice president of LIMRA’s annuity research.
“Certainly annuity payouts 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.”
Read More: Retirement savers eye guaranteed lifetime income amid recession fears