Today, we celebrate the 21st anniversary of Fixed Indexed Annuities (FIAs). And, what an anniversary it is! On February 15th, 1995, Fixed Indexed Annuities were first introduced to consumers as a key product for helping plan a secure, dependable source of income for retirement.
FIAs were first created in reaction to the economic volatility of 1994, offering consumers the ability to retain their principal while accruing a certain degree of growth – no matter the market conditions. Throughout the decades, consumers looking to have a predictable monthly income stream in retirement increasingly turned to the insurance product to balance their retirement portfolio. In the first quarter of 2015, sales of FIAs reached $11.6 billion, a 3.1 percent increase from sales in the same quarter of 2014. Additionally, FIAs now represent more than half – 55.6 percent – of the fixed annuity market during the quarter, a new record share, according to this LifeHealthPro article.
Yes, FIAs have become a mainstay product in retirement planning. But, what’s to come?
The Demographic of the FIA Consumer is Changing
The older millennial crowd, ages 27-34, is starting to find a nice momentum in their career and beginning to plan for retirement. But, this group also had a front-row seat to the great recession, leaving them to seek out products that offer the perfect blend of growth and balance. The IALC recently conducted a survey and found that 52 percent of millennials – more than any other age group – are interested in FIAs. As millennials continue to grow their retirement savings, FIAs will likely continue to shift to a younger demographic.
FIAs will continue to Evolve
The retirement landscape is shifting. Pensions are being cut and Social Security is less secure. Additionally, people are living longer. The lasting success of FIAs throughout the decades is part and parcel of the product’s ability to continually evolve to meet the changing needs of today’s consumer planning for retirement. Companies and agents are continuing to find innovative ways to incorporate new indexes and benefits into the products to offer consumers greater choice and flexibility. As the retirement landscape continues to shift towards a more pay for yourself era, FIAs will continue to change to cater to the needs of today’s retirement saver.
FIAs will Become More of Traditional Retirement Product
Because of the shifting retirement landscape, people are becoming more active retirement savers. Instead of expecting our retirement portfolio to just work in the background, savers are working more with their financial advisors. As a result, FIAs will likely become more of a mainstay retirement product, as savers look to diversify their portfolio with products that offer market growth and market protection.
These past 21 years of FIAs providing balance to retirement portfolios has been exciting – and fruitful. And, the future looks just as bright, as the product continues to progress and younger consumers continue to crave balance and security in retirement.
Happy 21st anniversary FIAs!