Annuities Aggregators: Over- and Under-Served Markets
Baby Boomers are the largest segment of purchasers of annuities and therefore are the biggest focus for annuities companies and annuities aggregation companies; this market may be nearing saturation as most of these individuals made their retirement savings decisions years ago. Three segments that are under-served are older GenXers, above-average income Millennials that are married (or single) without children, and married individuals who have the potential for major illnesses later in life (but are now healthy).
OVER-SERVED: Baby Boomers
- According to the previous research and additional research conducted, annuities are mostly marketed to Baby Boomers because they have long-demonstrated that they are the biggest purchasers of many types of annuities. Notably, this marketing focus does not apply to Baby Boomers with high wealth, strong portfolios, or large retirement accounts.
- The majority of this generation (78%) is using employer-sponsored retirement programs, with most of them beginning to save for retirement at about age 35. The estimated median retirement savings for this group is about $152 K. A full 61% of this generation believe they are currently saving an adequate amount of money for their retirement.
- Unfortunately, only a quarter (26%) of this generation have a back-up plan (or enough savings to survive) if they are forced into early retirement for any reason. These individuals are also very “skittish about equity markets” and suffer from “feelings of financial insecurity,” so they are looking to find the most reliable sources of retirement income – and annuities are often the answer to that search because they “are the only product that can insure against outliving retirement incomes.”
- Additionally, research shows that Baby Boomers are one of the biggest users of the media outlets where annuities and annuity aggregators are frequently discussed and advertised. These include publications like: Senior Living, Retirement Living, and New Retirement. For example, Retirement Living posted this article outlining their research-backed choices for the top three annuity companies for 2020 (Blueprint Income, Annuity Gator, and AgeUp); articles like these serve as educational for the most-likely-to-buy demographic segment.
- Another example is this article from Senior Living educating Baby Boomer (and older) readers on things to keep in mind when considering the purchase of a fixed annuity.
UNDER-SERVED: The Oldest GenXers
- GenXers would be the perfect under-served candidates for annuities. Logically, they are next-in-line to be the biggest purchasers of these items (behind Baby Boomers), as many still have two or more decades or work-life left in them. Now in middle age, these individuals would be considering longer-term issues more seriously (like ramping up retirement funds), as well as what will happen to their partners if/when they die early. This is especially true since this generation has already survived the housing crisis / Great Recession and the dot.com bubble, and ensuring they have plenty of money to live on now – as well as when they retire – is definitely on their minds.
- Notably, “GenXers hold significant power and influence despite their position as the smallest and most overlooked generation.” These individuals are set to inherit about $48 T from Baby Boomers over the next quarter-decade, and this doesn’t include the monies they’re earning (and saving/investing) themselves now.
- Additionally, nearly half (41%) of GenXers have reported they will be depending on their own savings and IRAs for retirement funds, though just half (51%) believe they’re actually saving enough to make it. One survey showed that a whopping 81% of GenXers believe they will struggle to financially survive during retirement (more so than their parents have or are). If they don’t expect their pensions to cover their retirement expenses, or want to ensure their partners are cared for after their deaths (as pensions typically stop after death), then annuities would be good possibilities for them.
- This generation has enough to deal with – from aging parents to kids that won’t leave (or move back into) home to paying off student loans and other debts. They also follow the news, and know that the country’s social security reserves are expected to be reduced (and therefore future payments will be reduced) due to legislative payout changes expected in the near future. Because of these and other reasons, they would be great candidates for the “guaranteed and predictable income” that annuities provide.
- Lastly, with Baby Boomers being the biggest purchasers of these, and that age/generation being one of the most influential on GenXers, those who have already purchased annuities – and reaped benefits from them – would be great word-of-mouth enthusiasts for the generation behind them, and could serve as examples of how to do retirement right.
- Of note, it will be important to weed out GenXers with the highest incomes, those who prefer to control how their monies are invested, or those who are scared of potential fees or the stipulations attached to the annuities. Also, weeding out those who do not make enough money or whose debt-to-income ratios are low will also be key to narrowing down the huge list of potentials to only those most likely to become purchasers.
UNDER-SERVED: Millennials (Above-Average Incomes, Single or Married, No Children)
- Millennials are “getting an early and strong start with their retirement savings,” especially compared to their GenX counterparts, and have a median savings of about $23 K in their current retirement accounts. This group shows high engagement levels in retirement planning, with nearly a quarter of them (21%) “frequently discuss savings, investing, and planning for retirement with family and friends.”
- For those who have maxed out their work-based IRA contribution limits and would like to stash more money into retirement savings – like many Millennials with higher-than-average incomes might be – or those with larger chunks of monies in their IRAs, annuities would be the perfect next-step or alternate solution.
- Nearly half (45%) of Millennials report intending to rely on an IRA or 401(k) to support them through retirement, and experts state that the “quality of retirement” for this group will largely depend on how much money they are able to save/how well they are able to prepare. Of interest, however, only about half (55%) believe they are currently saving enough for retirement.
- Interestingly, most Millennials (72%) admit not knowing enough about retirement investment options and have stated they would like to know more about the options available to them. This presents the perfect opportunity to pitch annuities to an already-engaged audience looking for the best places to put their monies.
- Additionally, many in this generation may fear the stock market (after seeing it fluctuate so wildly over the course of their early lives, as well as with recent events). Good Financial Cents notes that annuities are smarter investments for those afraid of the stock market fluctuations, and for those wishing to have a more-stable investment that will be “fully intact” in the future when they tap it. The older the Millennial, the more this is likely to be true.
- Millennials consider retirement to mean more “freedom,” more “enjoyment,” and a more “stress-free” life, so the “guaranteed and predictable income” offered by annuities might suit them well (for different reasons than it would appeal to GenXers).
- Weeding out those with high debt-to-income ratios, high student debts, or “unmanageable amount[s] of debt” – or about 31% of US Millennials – will be key to finding the right potential annuity buyers.
UNDER-SERVED: Individuals w/ Potential for Illness w/ Partners
- US News notes that people who are healthy and want the “security of a stream of income you can’t outlive” are strong candidates for annuities, and caution against people with health problems from purchasing annuities unless they have partners they wish to provide for after their deaths. Considering this, individuals who are currently healthy, but may be at-risk for an illness in the future, are an under-served market, especially if they have a significant other in their lives.
- An example would be a younger GenXer or older Millennial with lifestyle factors that might lead to health problems later in life. Information and data from health and insurance companies on those that smoke, are obese, engage in risky behaviors, or are potentials for other major health issues later in life would be key in identifying the ideal candidates falling into this range. These people sometimes cannot qualify for affordable life insurance policies, making them more interested in finding stable, long-term income like that offered by annuities.
- If this person is married or has a significant other, many annuities provide for continued payments to the spouse if the account holder dies. Some annuities even offer riders for additional payouts after death; each of these could be used as selling points to this market. Additionally, “some death benefits guarantee a return of premium, regardless of investment performance,” which would be very important to people considering whether their lives will be shortened, and their loved ones will be left without adequate financial stability.