ANNUITY STRATEGIES
tion of growth of their assets.”
Sales of multi-year-guarantee annuities reached $ 35.2 billion in the first quarter, up 20.8 % from the previous quarter, according to InsurTechExpress. com, an information and sales platform for insurance technology. Stolz notes that these products, which are seen as CD replacements, have“ for some time paid 1.5 % more on average than CDs, thereby making them an attractive alternative for their‘ safe’ money.”
“ It almost fascinates me that all advisors don’ t consider [ multi-year-guarantee annuities ] for their clients, especially for taxable monies,” says David Blanchett, head of retirement at PGIM, a unit of Prudential Financial in Lexington, Ky.“ The MYGAs are as about as simple as it comes, and they can be incredibly attractive for someone who is in a higher tax bracket who has a lot of money in a taxable account because the in some CDs or fixed-income vehicles, it’ s getting conservative investors a little more market exposure, but in a way that they find palatable.”
Another innovation annuity boosters talk about is the contingent deferred annuity— a product that comes with an insurance overlay so that the income stream continues after the underlying investments are depleted.
Phil Maffei, TIAA’ s head of corporate retirement solutions, says the industry is moving toward“ embedding” annuities into other products rather than offering them as stand-alone options.
He says:“ Default options like target-date strategies, with professional asset allocation processes that adjust the risk and return profile as participants age, have been among the most important innovations in the DC space over the last 20 years.”
Another innovation annuity boosters talk about is the contingent deferred annuity— a product that comes with an insurance overlay so that the income stream continues after the underlying investments are depleted.
growth in MYGAs is tax deferred until the monies are distributed,” he explains.
Strong equity markets in 2023 and 2024 were key to boosting the annuity space, as both years saw U. S. equity markets return 20 % or more.“ And even with the levels of volatility and uncertainty this year, we’ ve seen growth in the equity market, and those definitely are strong value props for those types of products,” Golembiewski says.
Additionally, he says, the asset managers or private equity firms have pumped lots of capital into the annuity space. The move of reinsurers into the space, meanwhile, has taken some of the risk of liabilities off carriers, further prompting the creation of new products and encouraging more product creators to come in, he says.
Besides the economic factors, the surge in annuities is also being driven by demographics. According to the Alliance for
Lifetime income, nearly 4.2 million Americans will turn 65 this year, which translates to 11,200 baby boomers turning 65 daily. Brendan McCarthy, head of Nuveen Retirement at TIAA, points out that this is“ the largest generation ever reaching retirement while traditional defined benefit pensions have virtually disappeared.”
In 1975, he says, 70 % of Americans had access to a defined benefit plan. Today, that number is down to 12 %. Blanchett says,“ So you have this growing cohort of Americans that I think are kind of natural consumers of annuities.”
And while the majority of annuity buyers are retired or at the age of retirement, the products appeal to, and are bought by, a wide range of consumers. Industry executives say most annuity buyers range in age from 50 to 70.
Lau believes the prime age is 55 and older.“ It’ s a good idea to bring annuities into play at that point,” he says,“ because you have sequence of returns risk as you head into retirement, which means if you have a down market right before you go into retirement, that’ s a real problem for your financial plan.”
The same goes for down markets right after you retire. So having protection from the annuities, Lau says, means that“ you don’ t need to hit your portfolio for income because you’ ve got the annuity generating strong income. Also, you can have products with downside protection where you won’ t lose money due to market performance.”
Lau says DPL also sees younger people who tend to be conservative investors buying annuities.“ That’ s a great way to get them some kind of market exposure, even with downside protection,” he says.“ Instead of just sitting in cash or sitting
Fraught Relationship
Some fee-only advisors have had a fraught relationship with annuities, though, because their commissions create a possible conflict of interest. Advisors have also argued that the products are expensive and complex.
But Golembiewski and others say more advisors are seeing the value of annuities because technology has made it easier for both the advisor and the end customer to use the products.
Lau says DPL has tried to address advisor worries by creating a commissionfree insurance platform with products that work in a fee-based advisor’ s business— and also add to the advisors’ billable AUM. They’ re much lower cost when they’ re free of commissions, Lau says.
He adds:“ Advisors have extremely strong opinions on annuities, probably more so than any other product, and they’ re generally not based on a lot of fact.”
Still, Tim Pitney, TIAA’ s head of lifetime income default solutions, says the shift in conversation is evident.“ A couple years ago, the conversations were very much around the‘ why.’ Why lifetime income? Now the conversations are:‘ How do we adopt this?’‘ How do we put this into a target-date fund?’”
54 | FINANCIAL ADVISOR MAGAZINE | NOVEMBER 2025 WWW. FA-MAG. COM