Insurers' annuity payouts hit a record $104B in 2023

Life insurers paid out a record sum in benefits in 2023 as Americans' appetite for guaranteed income continued to accelerated, according to a new industry data release.

Highlighting the growing role annuities play in retirement planning, the American Council of Life Insurers' latest Life Insurers Fact Book report said insurers paid out $104 billion in annuity benefits in 2023, an all-time high that represented a nine percent increase from 2022.

“In this era of economic uncertainty, life insurers are bringing financial certainty to retirees," David Chavern, president and CEO of the council, said in a Wednesday statement unveiling the results. "Regardless of how long you live, a lifetime annuity keeps paying, supplementing Social Security and helping reduce reliance on government for financial assistance.”

The report also revealed a rise in premiums paid into annuities, reaching $361 billion in 2023 – a nearly percent increase over the previous year.

Chavern pointed to demographic and economic factors driving this growth, including the decline of traditional pensions and the incoming wave of Americans approaching a retirement cliff.

“Traditional pensions that guarantee retirees income for life are declining. Couple that with the Peak 65 era we are in today with 11,200 on average daily reaching age 65, and it is clear why Americans are dedicating more of their savings to annuities. They want guaranteed sources of retirement income,” he said.

According to one calculation by Robert J. Shapiro, former undersecretary of Commerce for economic affairs, which was published by the Alliance for Lifetime Income's Retirement Income Institute, 30.4 million Americans will be turning 65 by the end of the decade. Shapiro estimates two-thirds of those may struggle to keep up their current lifestyles after they retire.

The rising interest rates of 2023 further boosted the appeal of annuities, allowing insurers to offer higher returns compared to recent years. Chavern noted that annuities offer a private-sector solution to ensuring financial stability for retirees, a message echoed in related research cited in the Fact Book.

The ACLI's latest figures come in the wake of new research by retirement experts Mark Warshawsky and Gaobo Pang, backed by ACLI, which suggests that incorporating annuities into retirement plans can lead to better outcomes than the traditional 4 percent retirement withdawal strategy. Their research indicates annuities may particularly benefit retirees with $250,000 or less in savings.

Chavern emphasized the critical role life insurers play during uncertain economic times.

“Life insurers are providing the tools people need for financial independence in all stages of life,” he said.