Allison Bell from ThinkAdvisor delivers again with a great article about who actually owns annuities. In addition to Allison's typical and welcomed financial clarity, she also includes some fantastic links to studies that support current annuity trends.
When I hear people say they "hate all annuities," I laugh out loud due to the absurdity of that statement. Every single person in America that has a Social Security number owns an annuity. Yes...that's correct. Social Security payments are annuity structures that provide a transfer of risk lifetime income stream. Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs), and Qualified Longevity Annuity Contracts (QLACs) are also structures that provide a transfer of risk lifetime income stream. Eerily similar because they are the same strategy that solves for longevity risk (i.e. outliving your money). Social Security payments and pension payments (if you are so fortunate) are annuities. So...do you still hate annuities?
With the new Retirement Security Act being signed into law in December of 2019, annuity ownership will start shifting from old people to young people. With 401k type retirement plans now starting to offer annuity lifetime income choices beside the mutual funds, plan participants will begin adding annuities for future retirement income needs.
Social Security was never intended to be the primary source of income when you retire, and the government is "subtly" nudging working Americans to start planning now for their future "income floor." That income floor is the guaranteed amount of money that will hit your bank account every month to cover expenses and lifestyle needs when you retire.
Young and old alike need to start laying that foundation for their own income floor. It's never too early or late to begin that income planning.