The Finance Of Longevity

State Of The Insured Retirement Industry

New views on the longevity risk and our retirement preparedness

Excerpts from a new study by The Insured Retirement Institute reveal that while our industry is poised for growth, our clients are nonetheless worried about making it through retirement

The annuity industry is poised for significant growth in the coming years. Consumers are concerned about retirement risks and outliving savings, uncertain how to use retirement account balances to create sustainable lifetime income and are worried about potential Social Security insolvency and rising medical costs. These factors are putting insured retirement income squarely on the radar of retirement savers and financial advisors

Today, too few Americans are using, or are even aware of, annuities, and too few are consulting with financial professionals regarding their retirement needs, wants, and aspirations. Evidence abounds that annuities and advisors improve outcomes. The insured retirement industry is focused on improving technologies that enable seamless inclusion of annuities in retirement portfolios. It is focused on promoting legislation that encourages and empowers Americans to save for retirement. And it is focused on getting the message to consumers that guaranteed income and protection from market downturns are valuable aspects of annuities that can help them live their best lives in retirement.

Framing The Need

Americans’ wealth continues to grow

  • Fidelity Investments reported the average 401(k) balance was $105,200 in the third quarter of 2019, down slightly from an average of $106,500 in the third quarter of 2018. For long-term savers (those in their plans for 10 or more years) the average balance reached a record $306,500 in Q3 2019, versus the previous high of $306,000 in Q3 2018.
  • Americans are also growing more dependent on their assets to generate sufficient retirement income. IRI research on Americans retired for between five and 15 years finds that 79 percent of retirees with at least $100,000 in retirement savings receive pension payments, with 64 percent citing a pension as providing at least 25 percent of their income from a pension. Meanwhile, only 28 percent of Baby Boomers receive or expect a pension.
  • Demographic shifts are under way that have far reaching implications for the marketing of retirement income solutions. The populations of older and younger Americans, and especially older, are expected to increase in the next 10 years, while the segment of the population generally perceived to be in peak earning years, and historically the bulk of the target market for annuities, is projected to shrink.
  • In the 3rd quarter of 2019, U.S. household assets were $130.2 trillion, with liabilities of $16.4 trillion and net worth of $113.8 trillion. Liabilities have remained relatively flat since 2008, while net worth has increased.
  • Despite increasing wealth, most Americans have only modest savings relative to their retirement income needs, and a substantial portion of their savings is held in 401(k) accounts.
  • Despite holding significant wealth in 401(k) plans, most plan participants do not connect their account balances to the creation of sustainable retirement income. For example, nearly seven in 10 baby boomer plan to simply withdraw money as needed.

Annuity Market Review

In 2016, fixed annuities surpassed variable annuities in market share for the first time, capturing 51% of annuity sales that year, led primarily by large annual increases in fixed indexed annuity sales throughout the decade. As of the third quarter of 2019, fixed products account for about 57% of total annuity sales, with fixed indexed annuities poised to surpass $70 billion in annual sales for the first time.

Variable annuities with embedded or optional guaranteed lifetime withdrawal benefits have lost more than half of their market share, falling from 59 percent of total sales in 2011 to 26 percent in 2019. This can be attributed in part to a falloff in 1035 exchanges – when guaranteed lifetime income benefits were first introduced, it was advantageous for investors to exchange from older variable annuities lacking such benefits to the newer products. Post-financial crisis and the de-risking of these benefits due to the persistent low interest rate environment, the reverse is true – investors are more likely to find it economically advantageous to remain in an older product with a richer guarantee.

Today, too few Americans are using, or are even aware of, annuities, and too few are consulting with financial professionals regarding their retirement needs, wants, and aspirations...

A bright spot in the variable landscape are structured annuities, also referred to as Registered Index Linked Annuities, or RILAs. Structure annuities are index option-based products that provide a capped upside and limited (the insurance company will absorb market loss greater than x%) or buffered (the insurance company will absorb the first x% of market loss) downside protection. These products appeal to investors who are willing to take some risk of investment loss in exchange for greater participation in market index gains than offered by a fixed indexed annuity, which guarantees against any loss of principal due to market downturns.

Sales of structured annuities are still small in dollar terms when compared to variable annuities with guaranteed income benefits or fixed indexed annuities, but they have grown considerably in market share in the past few years. Figures 1 through 4 and the accompanying data tables show the evolution of annuity sales and market share over the past decade, on both a broad product type (fixed versus variable) basis and through the more detailed lens of specific product type.

Distribution Channel Disruption & Evolution

The past decade saw unprecedented shifts in the types of annuities sold in each of the major distribution channels. In 2010, variable annuities with embedded or optional guaranteed lifetime withdrawal benefits (GLWBs) were the top selling annuity product in every channel, and in the Wirehouse and Regional broker-dealer channels almost to the exclusion of all other types.

By 2019 the product mix in every channel had become far more diversified, with fixed indexed annuities the dominant product in the Independent channel, while market-value adjusted (MVA) and traditional fixed products accounted for the majority of sales in the Bank and Regional channels. It is only in the Wirehouse and Captive channels that VA/GLWB still captures the largest percentage of sales, albeit with loss of market share to other types. Figure 5 shows how the mix of annuity types has changed in each channel between 2010 and 2019.


  • The longest bull market in history is also a potential headwind – nervous investors may sit on the sidelines in cash for fear of having any exposure to a market downturn.
  • Efforts by the states to enact their own fiduciary standards continue apace, with the potential to ultimately create a patchwork of differing standards with which companies may find it difficult and costly to comply.
  • Distributor, advisor, and consumer perception of, and reaction to, moves to reduce the risk of lifetime income guarantee liabilities.




About the Insured Retirement Institute
The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of more than 30 organizations and is the only association that represents
the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-forprofit organization, IRI provides an
objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at