3 Types of People Who Might Consider an Annuity

This group consists mainly of people who have a fairly conventional idea of a retirement spent in well-earned leisure. They:

• Have stopped work completely
• Are confident about their financial situation and optimistic about the future
• Believe in “giving back” by being generous with their time and money

On average, Traditional Retirees have an annual income of just under $100,000 and investable assets of $1 million or more. Typically, they:

• Want to protect the money they have
• Are savers and bargain hunters
• Carry out minimal independent financial research, relying heavily on their financial professional for education and recommendations

Our research found that this group is relatively open to purchasing annuities, with almost half reporting that they own one or more. Traditional Retirees value the protection elements and tax advantage an annuity can offer. This group tends to own many products and sees the potential an annuity has to further diversify their portfolio.

We spoke with Brighthouse Financial Head of National Internal Sales, Kevin Macilvane, who shared his perspective on how to talk to each of these groups. “The urge for Traditional Retirees is to protect the money they have saved – to protect the ‘pile’ as they see it,” explains Kevin. “Show them that it’s not about the pile, it’s about the lifestyle they want to lead. Together you need to figure out what that lifestyle looks like; figure out what ‘comfortable’ looks like. Then you can find them a product that protects a portion of their assets and takes some pressure off the pile, while giving them some income to help support the lifestyle they want.”

This is the new generation of pre-retirees who want to keep working in retirement, not because they have to, but because they want to. They:

• Are planning on either extending their careers or taking on new jobs or challenges
• Are optimistic, outgoing, and driven, but worry that stopping work will create a void in their lives
• Work hard and play hard, cherishing the leisure time in their busy schedules

On average, Busy Pre-Retirees have an annual income of $141,000 or more and investable assets of $1 million or more. Generally, they:

• Understand the value of saving, but believe spending allows them to enjoy life
• Are engaged investors who are open to taking “calculated” financial risks
• Keep up with the latest news and consult friends, but tend to go to their financial professional for help with financial decisions

Our research found that this group tends to purchase life insurance more often than annuities, with more than 70% reporting that they currently own a life insurance policy. Busy Pre-Retirees tend to have older dependents and want to protect their families in the working years they have left.

“Busy Pre-Retirees struggle with the endpoint, that moment when they finally retire,” said Kevin. “[Because] they’re busy people, they may use that [as an] excuse to avoid making a plan for their retirement. The longer they delay, the more likely they are to have surprises, and they’re not the sort of people who like surprises. Get them to start planning today and looking at products that [can] give them a guaranteed income. Explain that it’s so they can avoid those surprises and retire with real confidence when the time is right. This group is generally looking to grow its savings and may see the value of an annuity with growth potential.”

These are people who work during their retirement years because they feel they have to. They:

• Are pessimistic and worry about issues like unemployment and illness
• Are family-focused and enjoy caring for others
• Have modest ambitions for retirement, but fear that even these may be out of reach

On average, Concerned Pre-Retirees have an annual income of just under $100,000 and investable assets of $790,000 or more. Usually they:

• Are frugal and rarely, if ever, spend money on non-essentials
• Tend to focus on saving for a short-term “buffer” rather than long-term retirement goals
• Are generally positive about their financial professionals, but tend to rely on them less than other groups, despite being the least financially knowledgeable

Our research found that this group is the most likely of the three groups to own an annuity, with more than half reporting that they already have one, although the products they own tend to be less complex, more transactional, and fixed.

Kevin suggested this approach when working with Concerned Pre-Retirees: “Human-to-human interaction is very important to this group, which is why you should try to have meetings in person. Their worrisome mentality is made worse by having fewer investable assets for their retirement than the other groups. They are mindful that there might not be enough money to support them for their whole retirement. They really need their [financial professional’s] help to find the products that will take some of the pressure off and make their money do more for them.”