Just Don’t Use The Word Annuity…
People like what annuities do, they just wish they were called by a different name, according to recent research among Baby Boomers, conducted by a major insurance company with the help of a large polling firm.
Asked to identify their preference between an investment vehicle that delivers four percent return on their money with a guarantee against losing value and a vehicle that delivers eight percent return but subjects their money to market risk, an overwhelming 80 percent of the 3,200 people surveyed expressed a preference for the safer investment vehicle. Almost like the famous blind taste tests on coffee or pepsi, participants in the research were surprised at how many benefits hybrid index annuities offered: safety, yield potential, ample liquidity, principal guarantees, and security of income.
Yet even after describing an annuity-like solution as their preferred financial vehicle, more than half — 54 percent — of Americans aged 44 to 75 expressed distaste for the word “annuity.” The findings come from a survey conducted by Allianz Life Insurance Company of North America. The trouble is, the public continues to have long-held, often misguided, views on annuities, the study concludes. Fifty-three percent of study participants said they first formed their opinion of annuities 10 to 20 or more years ago, while 64 percent said they haven’t researched annuities since that time.
The bottom line: Retirement-minded investors who can get past the word “annuity” will be inclined to dig in with an open mind and eventually choose an annuity for part of their portfolio.
In the extensive study, “Reclaiming the Future: Challenging Retirement Income Perceptions”, 76 percent of annuity owners indicated they are “very happy” with their purchase — so much so that consumers ranked annuities second-highest (50 percent) in satisfaction among all financial instruments, easily surpassing mutual funds (38 percent satisfaction level), stocks (36 percent), U.S. savings bonds (35 percent) and CDs (25 percent).
Steve Jurich is an Investment Consultant specializing in retirement income and estate planning, with an emphasis on annuities and life insurance. He is licensed in securities, insurance, and real estate. He offers objective comparisons among leading Hybrid Index Annuities and cash value life insurance.