Products July 25, 2023

TIAA In-Plan Annuity Option Hits 250,000 Participants

The in-plan retirement income marker coincides with another record quarter for retail annuities, according to a separate report from LIMRA.

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TIAA announced that its in-retirement plan annuity offering is now being used by more than 250,000 participant accounts, as retail annuity sales continue to boom.

TIAA, which has been providing annuity-backed retirement income products in 403(b) plans for over 100 years, introduced a custom default product in 2014, and then rolled the offering out more broadly in 2018 with RetirePlus. On Monday, the New York-based firm announced the milestone of a quarter-of-a-million participants are using the service designed to provide the purchase of a guaranteed income option during the retirement saving phase, along with institutional pricing.

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“Retirement is becoming even more difficult to finance for Americans, and many are rightly worried about running out of money,” Kourtney Gibson, chief institutional client officer at TIAA, said in a statement. “RetirePlus helps plan sponsors empower their employees to build a better retirement by providing access to a ‘personal pension’-like guaranteed monthly income stream in retirement.”

TIAA’s product can be used as a qualified default investment alternative in retirement plans, an option supporters of annuities often say is essential for the products to get widespread uptake with participants. Still, concerns among some advisers and plan sponsors remain about in-plan offerings, ranging from regulatory concerns—which have been eased with recent retirement legislation—to portability and cost.

QDIA Is Key

According to TIAA, the QDIA offering, which puts participants into a diversified portfolio that includes its TIAA Traditional annuity, gives participants “the simplicity of a target-date fund with the opportunity to turn all or part of their savings into guaranteed lifetime income in retirement.”

The firm had previously announced that RetirePlus signed its 250th institutional client in 2023, and today has over $20 billion in assets under administration.

TIAA also offers a fixed annuity provided through a managed account or target-date portfolio strategies in 401(k) plans. The firm has paid more than $5.6 billion in lifetime income to retired clients in 2022 and has $1.2 trillion in assets under management.

Another Individual Sales Record

In separate news, total annuity sales increased 12% year-over-year to $88.6 billion in the second quarter of 2023, insurance industry association LIMRA announced Tuesday.

The high was driven by record sales of registered index-linked annuities, or RILAs, and fixed indexed annuities, according to LIMRA’s U.S. Individual Annuity Sales Survey. The growth in those products was boosted in part by “double-digit equity market increases and stable interest rates” that have “prompted investors to seek out greater investment growth opportunity,” Todd Giesing, assistant vice president of LIMRA Annuity Research, said in a statement.

The association also noted that deferred income annuities topped $1 billion in sales in 2Q 2023 for the first time, in part due to buyers locking in relatively higher interest rates as the Federal Reserve considers slowing rate hikes.

“The remarkable growth of income annuity product sales is a result of broad growth across the industry,” Giesing said. “Reports in the second quarter that the Federal Reserve was expected to slow interest rate hikes likely prompted investors who had been sitting on the fence to lock in the favorable rate of returns offered.”

The quarterly increase resulted in 28% year-over-year growth in the first half of 2023, reaching $182.7 billion, the highest sales ever recorded in the first six months of a year by LIMRA.

The association is forecasting continued growth for individual annuity sales in 2023, with sales set to “potentially surpass the record sales set in 2022.”

Data & Research July 25, 2023

Americans Pick Advisers Who Appreciate Their Needs, Have Track Record, Survey Says

Data also showed that having an adviser boosts a respondent’s financial confidence.

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When choosing a financial adviser, roughly half of Americans look for someone who can address their specific needs and can show an established track record, according to an annual survey released Monday by Northwestern Mutual. In an annual survey over 2,700 Americans, 54% of respondents said when choosing an adviser they look for someone who understands their specific needs for their stage in life was an important factor, and 51% said the same of an adviser who has an established track record.

The survey also found that respondents’ leading reasons for deciding to hire an adviser include accessing professional expertise they lack (48%); assistance with long-term and goal-oriented planning (48%); reducing anxiety (44%); and assistance with financial discipline (43%).

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The survey found that 37% of Americans work with an adviser and that doing so can increase one’s financial confidence. When it came to retirees, a much larger 80% said they were confident they would have enough money for retirement, compared with 58% confidence of those without an adviser.

The sample was weighted for household income, so the confidence gap cannot be dismissed by the objection that those who hire advisers already have more money and are therefore more confident in their finances.

This boost in confidence was also detected in a question about the availability of Social Security, an issue seemingly unrelated to one’s access to an adviser: 66% of respondents with an adviser said they were confident that Social Security “will be there when I need it,” compared with 49% of those without an adviser.

Many respondents acknowledged a need for better financial planning: 66% of respondents said their financial planning needed improvement, up from 62% last year. The responses varied generationally, as younger respondents—79% of both Millennials and Generation Z—resoundingly answered this question in the affirmative, compared with 67% of Generation X and 52% of Baby Boomers.

However, the increase in acknowledged need for financial planning was higher for older respondents. Though 79% of Millennials and Gen Z said they needed more financial planning, 74% said the same last year. At the time, only 41% of Boomers said they needed more, compared with 52% this year, an 11-point jump.

The survey was conducted from February 17 to March 2 and sampled 2,740 American adults. The results were weighted for education, age, gender, race, region and household income.

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