A couple of years again, I requested an advisor why he had shifted to recommending fastened listed annuities (FIAs) reasonably than variable annuities. His reply was quite simple: “My shoppers are getting older, and they’re extra excited by safety than progress.”

This has confirmed to be a prophetic assertion for the annuity business. In accordance with LIMRA, in 2013, fastened annuities and FIAs made up simply 30% of the $230 billion in complete annuity gross sales. Structured annuities have been so new they have been simply 1% of complete gross sales. Variable annuities dominated the market, with 62% of complete gross sales. 

Quick ahead to 2023 — fastened annuities and FIAs, the 2 annuity sorts that present 100% draw back safety, captured two-thirds of the entire $385 billion in file annuity gross sales whereas variable annuities captured simply shy of 15%. Amazingly, fastened annuity gross sales surpassed their earlier annual file by a whopping 46%.

So, what’s modified? It’s easy, actually. In 2024, 12,000 child boomers will flip 65 every day. These people have a really totally different funding goal than they did 10-20 years in the past. It’s not about accumulation for them — it’s now about safety.

The standard 60/40 portfolio is meant to supply conservative traders with a lot of this desired safety. Nevertheless, in 2022, these with a conventional fairness/bond allocation noticed their portfolio fall 16%. Lots of the child boomers who had already retired or have been very close to retirement have been on the lookout for a distinct resolution in 2023. And with the Fed fee hikes all year long, insurance coverage firms have been capable of supply traders extra engaging fastened annuity and FIA phrases. 

Within the fourth quarter of 2023, gross sales of structured annuities (also called registered index-linked annuities, or RILAs), a mere toddler within the annuity business simply 10 years in the past, surpassed variable annuity gross sales for the primary time ever. For the yr, they captured a file $47.4 billion in gross sales.

The elevated reputation of this annuity class versus variable annuities is undoubtedly as a result of the truth that structured annuities present some draw back safety whereas variable annuities present comparatively little with out added riders. This makes them a gorgeous various for the fairness portion of an investor’s portfolio. Nevertheless, if an investor’s major objective is to not go backwards in any respect, then structured annuities, even with their partial safety, will merely not have the identical attraction of fastened annuities or FIAs.