You’ve probably seen this attention-grabbing advertising message on television or on a billboard: “The First Person To Live To 150 Is Alive Today.” Not surprisingly, the ad comes from an insurance company–Prudential–and the pitch is for annuities.
You may find the message optimistic, unsettling, or just plain disturbing–but it does highlight the insurance industry’s core value proposition for annuities: Even the best retirement plan can’t precisely account for how long you’ll live–so use insurance to hedge your risk.
It’s been slow going. Annuity sales have mostly bumped along as a small fraction of the overall retirement market, the result of complex product offerings, high fees in the variable annuity segment, and buyer resistance to locking up their money with an uncertain future total return.
But that may be changing. One annuity category, in particular, is starting to show impressive growth: the deferred income annuity (DIA). These income annuities typically let buyers set a future date to start receiving income. Buyers pay an initial premium and then continue making additional premium contributions along the way.