With interest rates set to rise, now may be the best time for insurance agents to pitch annuities.
Insurance agents specializing in annuity sales might have a larger audience to market to than previously thought. A recent survey indicates that the average non-annuity buyer hasn’t closed the door on purchasing an annuity.
When the Secure Retirement Institute — an offshoot of insurance industry trade group LIMRA LOMA — surveyed roughly 2,400 people last year who had considered but not bought an annuity, less than 20% responded that they “hated” annuities and are unlikely to ever buy the product. 42%, however, said that they hadn’t bought an annuity because they felt that it wasn’t the right time to do so, leaving open the possibility of investing in an annuity in the future.
The survey further points to the demographic characteristics of those non-annuity buyers that could make them suitable annuity candidates. Coupled with an expected rise in interest rates, insurance agents may find a promising target market of potential annuity buyers if they craft the right sales pitch.
“Buy Now While Interest Rates Are on the Rise”
According to the Wall Street Journal, the Federal Reserve Board plans to raise interest rates twice this year after hiking them in March. Because insurers are able to offer higher rates to investors, any increase in interest rates tends to benefit savings products like annuities.
As a result, agents can present annuities, particularly fixed annuities, as a favorable retirement investment vehicle in a time of rising interest rates. To be sure, non-buyers have money to invest. According to the Secure Retirement Institute survey, more than half of the respondents who hadn’t bought an annuity held more than $250,000 in investable assets, with more than two-thirds parking that money in mutual funds or stocks. Another quarter had yet to make any investment with their dollars.
As interest rates climb, those non-buyers may be looking for other investment options like annuities. That’s why now is the time for agents to make their case.
“Buy When You Are Younger to Lock in Higher Interest Rates and Build a Nest Egg”
According to the Secure Retirement Institute, the average age of a first-time annuity buyer was 63, while non-buyers had an average age of 57. That doesn’t mean that agents should wait to pitch annuities to older prospects, however. Those younger non-buyers who expressed an interest in annuities could be convinced that it’s better to buy now and watch their retirement nest egg grow for a longer period at those higher rates.
At least one study indicates that they need to start saving sooner rather than later. In 2013, the National Institute on Retirement Security estimated that the collective retirement savings deficit for working households between the age of 25 to 64 is between $6.8 trillion and $14 trillion. In addition, 45% of households with a working-age adult (about 38 million) didn’t own any type of retirement account. Retirement income products like annuities can close that gap.
Just as your prospects and clients shouldn’t wait to start saving for retirement, neither should insurance agents delay educating them on annuities. With interest rates on the rise, now may be the best time to discuss annuities with clients who haven’t yet made a purchase.