Annuities appeal to the middle classBlog added by Jason Kestler on February 14, 2011
Jason Kestler

Jason Kestler

Leesburg, VA

Joined: August 15, 2009

Financial Advisor Magazine describes its audience as financial planners, registered investment advisers and independent broker/dealers serving affluent, high-net worth clients. As you would expect, this magazine typically focuses on the merits of very complex investment strategies designed to impress wealthy clients. Fixed annuities are rarely mentioned.

Thus, it was interesting to read an article in their October 2009 issue entitled “Annuities for the Middle Class?” The popularity of annuities with the middle class seemed to surprise the author of the article, Senior Editor Eric Rasmussen.

Here are some excerpts. The italicized text was added by us:
    Since the market collapse last year, more investors have been turning to annuities — the ultimate chastity belt at a time when wild volatility in the stock market has reined in more promiscuous behavior and risk. Given the widespread fear in the Great Recession, it’s no surprise annuity sales have skyrocketed over the last year.

    Amid the lofty new numbers, there is also new survey data from insurance companies that suggests the nonqualified annuity marketplace is not only booming but also has a remarkably pure ownership: middle-class retirees. A survey of 1,003 U.S. annuity owners recently conducted by the Gallup Organization for the Committee of Annuity Insurers, a coalition of life insurance companies, has revealed that 8 in 10 annuity owners have household incomes of less than $100,000. Meanwhile, only 4 percent earn more than $200,000.

    Go down further in the income band, and you find that 42 percent of these annuity owners have household incomes of less than $50,000, says Gallup. Most of those owners, 69 percent of them, are already retired.

    According to the Gallup survey, 35 percent of the annuity owners surveyed never had access to a qualified plan when they were working.

    “If you were in the distribution phase and 2008 scared you,” says financial planner Rick Fingerman, the president and CEO of Financial Planning Solutions in Newton, Mass., “and you were frightened out of the market, it might make sense for you to put that in an annuity. So you can at least say I’ve got $1,000 a month guaranteed for the rest of my life.
As you can see, annuities are remarkably popular with the middle class, particularly in the absence of other products that offer their appealing combination of safety, tax deferral and attractive interest rates.

What this magazine did not publish, but which the survey found, was that over 90 percent of annuity owners believe they have done a very good job of saving for retirement, and they think their annuities contribute to a great extent to this preparedness. Also, 79 percent think that annuities are an important source of retirement security and make them feel more comfortable in times of financial uncertainty. More on this and other topics at
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