Will increasing annuity sales boost life insurance stocks?
The Annuity Man
Great article by Timothy Smith in Investopedia that discusses why life insurance stocks might benefit from the new Secure Retirement Act. Washington, DC wants the public to start planning for their future retirement income needs.
Social Security was never designed to be the primary income source for retirement, but for many Americans...it's the only source. The new law that was signed in December of 2019 encourages employers to offer lifetime income annuity strategies within their retirement plans (i.e. 401ks, 403bs, etc.) so that the employees can start planning now for their own personal pensions.
Single Premium Immediate Annuities (SPIAs), Deferred Income Annuities (DIAs), and Qualified Longevity Annuity Contracts (QLACs) will be the primary product types used to accomplish this goal. All are simplistic transfer of risk contracts that guarantee a lifetime income stream and have no annual fees. The primary pricing mechanism is your life expectancy (or life expectancies...if joint) at the time you start the payments. Interest rates play a secondary role in the pricing formula.
With over 10,000 baby boomers reaching retirement age every single day, there is a current and future demographic tidal wave of consumers that are looking for contractual guarantees, no risk, and lifetime income streams. Because annuities are the only financial product on the planet that can contractually guarantee payments you can never outlive, life insurance companies (who issue annuities) are primed to benefit by increasing demand. Add the fact that the Secure Retirement Act will now have annuity strategies available in 401ks to millions of new customers, the investment planets may have aligned themselves for legitimate potential growth.
It's at least with doing some due diligence on these boring life insurance companies. Right?