NEW ORLEANS (TheStreet) -- Supporters of annuity plans, who often bill them as "personal pensions," are touting their recession era durability and pushing for federal tax breaks they say will advance their adoption.
The economic downturn seems to have had no ill effect on the immediate annuity market, which saw sales increase 30% in 2008, even as financial markets crashed.
"It is the only segment of the annuity market that grew last year and that will continue," says Craig Hemke, president and founder of BuyAPension.com, a site where users compare and buy plans.
Concerns about rising prices and the diminished buying power of the dollar are helping to shape new annuity products, including offerings with payments that adjust for inflation, rather than the traditional Cost of Living Index.
"An adjustment that somewhat approximates inflation could be valuable for someone who is worried about it," Hemke says. "At the end of the day, the number one choice of immediate annuities is still 'life only' or 'fixed.' People just want as much income as they can."
Other products go beyond "life only" plans to ensure a benefit for beneficiaries.
Who are the people relying on annuities?
A recent survey by the Gallup Organization and the Committee of Annuity Insurers (CAI) says that eight out of 10 annuity owners have annual household incomes that are less than $100,000. Nearly half have household incomes that are less than $50,000.
Annuity providers are watching closely to see if industry-friendly legislation makes headway in Washington. Federal lawmakers are mulling bills that would allow retirees to exclude half of any annuity payouts from their taxable income. A House bill would limit that amount to $10,000 per year, while a Senate bill would cap it at $20,000. Another proposal being considered by the Obama Administration is to allow a portion of 401(k) contributions to be earmarked for the purchase of an annuity.
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