Immediate Annuities Appealing To Pre-Retirees Survey Finds

Most owners are older and retired, the survey says. Forty-two percent are in their 70s and 31% are 80 or older. Although four out of five are retired, more than half of respondents say they bought their immediate annuity before retirement.

Sixty-four percent of owners earn less than $50,000 annually. Most, 92%, receive Social Security income. And, 60% receive dividends or interest.

"Many are using immediate annuities as a personal pension," Keating said. "A defined benefit as a companion to other assets to secure a dignified retirement."

Fifty-four percent of owners pay for their immediate annuity with nonqualified savings or savings separate from an individual retirement account. Twenty-six percent use money from a retirement savings plan accrued through work. And 24% use money from an IRA.

These figure are likely to change "because theres a lot of money in IRAs that havent reached payoff stage, so those income sources will become more important," said Paul Yakoboski, ACLI Policy Research Director, who also took part in the roundtable.

More than half of owners say they own more than one immediate annuity. Other annuities are sometimes in a spouses name or were bought at another time, according to the survey.

Seventy-two percent of immediate annuity owners own a fixed annuity. Fixed annuities appeal to immediate annuity buyers because they are looking for a steady income in retirement. The stream from a fixed product never fluctuates because it is not tied to the stock market. Only 19% own variable annuities. Nine percent own both types, according to the survey.

Among fixed owners, 91% think not losing the money theyve invested is very important, according to the survey. Seventy-three percent said the stability of their payments relative to the ups and downs of the stock market is very important.

"The conclusion is the immediate annuity makes an important contribution to retirement," Yakoboski said. "This product makes a big difference in the lives of individuals in retirement, they view this as an extremely important retirement tool."

Reproduced from National Underwriter Edition, July 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.