Fixed-income annuities have never paid out so little, and yet had so much appeal. These annuities, which provide a lifetime of guaranteed income, are paying out 12% less, on average, than in 2011, and 25% less than in 2007. And yet sales jumped 17% last year, to their highest level in five years.
The appetite for guaranteed retirement income is reshaping the industry, and drawing investors away from the enormously popular variable-annuity market. Sales of variable annuities usually rise with the stock market, but they have declined steadily for three consecutive years and are 24% below their 2007 highs. Why this new hunger for fixed annuities? As investors get real about how to turn their nest eggs into lifelong income, they’re discovering what academics and analysts have been preaching for years: fixed income annuities outshine all other income-producing options.