Gen Xers are most likely to buy annuities: Survey

Generation X might be the most overlooked cohort of investors — but its oldest members have retirement security on their minds, and the age group is more interested in annuities than any other.

Xers, those born between 1965 and 1980, are outnumbered by Baby Boomers and millennials. However, many are in their prime earning years. Importantly, most lack the financial security of traditional pension plans, which is where annuities come in, according to a report from data firm Cannex and the industry group Alliance for Lifetime Income.

In the financial services industry, “we get ignored,” said Tamiko Toland, an Xer and director or retirement markets at Cannex. Because of their accumulated wealth, boomers get much of the industry’s attention, and after that, “it jumps straight to millennials.”

Although they are young to own the products, 4% of people ages 45 to 54 have annuities, results of the report’s survey of more than 1,500 people show. By comparison, that figure is 12% among people 55 to 64 and 20% for those 65 to 75. But 22% of the 45 to 54 age group said they are extremely interested in annuities, that report noted. For the older groups, that level of interest stood at 15% and 7%. Adding the figures up for who wants annuities and who already has them puts the level at just over a quarter among people in all three age groups.

But a key difference among Xers, the 45 to 54 age group, is that they were the least likely to say they were not interested in annuities, at 24%, compared with 32% and 47% among the older groups, according to the report. 

“When people have both Social Security and a pension, there’s a good chance they don’t need additional income,” Toland said. 

Pensions are all but nonexistent for younger workers, and many are worried about cuts to Social Security, she noted. That isn’t a generational phenomenon, and it shows that there is a continuum of needs when it comes to retirement income planning, she noted.

Factor in capital markets assumptions that are much different from what boomers saw in their prime earning years, and it’s easy to see why there is so much interest in protecting retirement income, she said. Younger clients might also be more receptive to annuities as accumulation products, which can later lead to conversations about retirement income, she noted.

Less than a quarter of people surveyed said their 401(k) plans included annuity options. Among those with such plans, 4% said they already own an annuity, and 56% said they were interested in the products, according to the report. 

The groups also surveyed about 600 financial professionals. Eighty-four percent of those respondents said the concept of protection was important when planning for a client’s retirement income, the report noted. 

Among people working with advisers, there was a correlation between satisfaction and whether they owned annuities. About three quarters of those without annuities said they were extremely satisfied with their adviser, but that figure was 84% for people who own annuities. 

“The clients who have a financial planner who recommends annuities are happier with their financial planner. That point should not be lost,” Toland said. 

“This is a conversation many clients want to have — people want protection,” she said. “You may not feel it personally, but this message may be resonating with your clients in a way that you’re not expecting.”