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4 reasons FIAs are thriving in a low interest rate market.

Since the onset of the Great Recession in 2008, analysts have watched the Federal Reserve keep interest rates at or just above zero percent. And, significant rate increases do not appear to be on the horizon. The last time the Fed short-term rates were at zero, they stayed there for more than 21 years. Although markets show signs of recovery, the Fed remains tepid and rates slow to rise.

Traditionally, low rates slow the sale of interest-sensitive retirement products, such as fixed indexed annuities. However, in recent years, this market has had record sales. In fact, 2015 was the biggest year to date, with more than $54.5 billion in indexed annuities sales, a 13 percent increase over 2014.

These numbers may show atypical market behavior, but here are four reasons FIAs are thriving today.


Studies indicate growing trend is fueled by a retiring public looking for guaranteed income. The LIMRA Secure Retirement Institute's research finds Americans' top financial goal is having enough money to last through retirement. As more people approach retirement and less pensions, the more people we see turning to fixed indexed annuities to alleviate concerns and generate guaranteed income.


Currently, more than 10,000 boomers retire every day. By 2025, 64 million Americans will be retired. Additionally, the Social Security Administration reports rising longevity. Today's 65 year old men are expected to live to 84, women to 86. One in 10 will live past 95. This means more people, living longer, looking for more financial security. Additionally, with more than half of today's Boomers (50-59) interested in converting their assets to guaranteed income, this annuity trend shows no signs of slowing.



Low interest rates have also spurred the proliferation of guaranteed lifetime withdrawal benefit riders. For instance, in the second quarter of 2015, Wink, Inc., reported 58.7 percent of purchasers elected to add one of these lifetime riders. This product mix offers a strong combination of secure principal protection and guaranteed lifelong income.


As annuity interests grow, so does the necessity for innovation. In order to meet the needs of an expanding variety of clients, insurance companies are developing new crediting methods for their guaranteed lifetime withdrawal benefit riders to help retirees choose the approach that's right for them.

In particular, a series of index-linked lifetime income rider options have emerged. Now clients can secure principal protection and lifetime income benefits, while retaining the possibility of higher returns linked to various market crediting methods.

This multi-pronged approach has broad appeal with an untapped client base-individuals who want principal protection, guaranteed lifetime income and the potential for higher payouts.

The Time is Right

Time is valuable. No one appreciates that more than retirees. The fact of the matter is, regardless of rates, a generation of Americans is rapidly retiring. By waiting to time future interest rates or the market, clients stand to lose value in a fixed indexed annuity product available to them right now.

Kirby Wood is the Senior Vice President and Chief Marketing Officer at American Equity Investment Life Insurance Company. He can be reached at
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Author:Wood, Kirby
Publication:Retirement Advisor
Date:Jul 1, 2016
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