Data and Research July 25, 2024

Military Households Express Higher Retirement Confidence Than Nonmilitary Households

According to a survey conducted by the Employee Benefits Research Institute, military households are more likely to have a higher level of financial assets and are less concerned about debt.

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The Employee Benefit Research Institute’s recent Retirement Confidence Survey found that in 2024, Americans’ confidence in having enough money to live comfortably throughout retirement has not fully recovered from a decline in 2023. 

However, when comparing the retirement experiences of military households with those of nonmilitary households, EBRI found that retirement confidence was much higher among those who served in the military. 

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Of American households that include individuals ages 25 and older, 13% are considered military households, or those whose respondents are either actively in the military or are veterans. Military-household respondents were also more likely to be widowed or married than those from nonmilitary households, as well as more likely to be male and White. In contrast, the nonmilitary households surveyed were more likely to be female and Hispanic. 

Overall, EBRI found that military households were more likely to have the highest levels of financial assets and were less likely to consider debt to be a problem when compared to nonmilitary households. 

For example, 49% of military households reported having $250,000 or more in financial assets, compared with 40% of the nonmilitary households. However, 14% of nonmilitary households have asset levels in the lower-level category of $100,000 to $249,999, while 9% of military households reported this level of assets. 

As for debt, 55% of military households consider debt not to be a problem or a hinderance to their retirement savings. Not surprisingly, military households reported lower debt issues than nonmilitary households. In addition, military households were more likely to say they have enough savings to handle an emergency or a sudden large expense. 

Service members who joined after 2006 but before January 2018 had the choice of staying with the legacy traditional retirement system or joining the Blended Retirement System, which combines the traditional defined benefit pension with the defined contribution federal Thrift Savings plan. According to EBRI, 37% of military respondents said they use the traditional retirement system, 7% use the BRS, while 10% are not sure and 45% said neither. 

In EBRI’s Retirement Confidence Survey, Americans with higher incomes are typically more likely to be confident about having enough income in retirement, which this holds true for both military and nonmilitary households. 

However, 89% of military households with incomes of $75,000 or more said they were confident they will have enough money throughout their retirement, whereas 81% of nonmilitary households with the same income level reported feeling confident about their retirement income.  

While approximately 90% of military households disagreed with the statement that their military service has prevented them from saving for retirement, EBRI found that the larger share (71%) who separate from the armed forces before military retirement still have to navigate changes in their careers, which involves knowing what to do with their retirement savings.  

There is also a discrepancy between military households reporting having more knowledge about the regulations around retirement plans while also being more likely to have taken a retirement plan loan or withdrawal. For example, 22% of military households reported taking a loan or withdrawal from their workplace retirement plan, compared to 16% of nonmilitary households. 

“Thus, while military service can put individuals on a better track for retirement, they still face many of the same issues as those who have not been in the military, such as when to retire, preserving retirement assets and working in retirement,” EBRI’s report stated.  

Data and Research July 24, 2024

Individual Annuity Sales Reach $215B in First Half of 2024

The growth is the highest for the first six months of any year since LIMRA started tracking sales in the 1980s. 

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U.S. individual annuity sales set a new record in the first half of 2024, according to new data from LIMRA. Total sales hit $215.2 billion in the first half of the year, a 19% jump from prior-year results and a new sales record for the first six months of a year since LIMRA started tracking sales in the 1980s. 

In the second quarter alone, total annuity sales increased 25% year-over-year to $108.5 billion. According to LIMRA, this is the second largest quarterly total ever recorded, just shy of the record set in the fourth quarter of 2023.  

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“Annuities have benefited from the favorable economic conditions and the Federal Reserve not cutting interest rates this year,” said Bryan Hodgens, LIMRA’s senior vice president and head of research, in a statement. “We also believe demographic trends and a growing awareness of [the] unique value proposition annuities offer have shifted the U.S. annuity market post pandemic, resulting in 15 consecutive quarters of strong sales growth.” 

The Fed has indicated it will start cutting interest rates at its mid-September meeting, given inflation’s improved trajectory and a labor market in better balance. 

Within the broad range of annuities, fixed-indexed annuities had another record quarter, with sales totaling $29.7 billion, 17% higher than the prior year.  

“Investor interest in products that offer downside protection with upside growth potential remains high,” Hodgens said. “To put these results into perspective, just two years ago, FIA sales [for the year] were $10 billion lower than the second quarter 2024 results.”  

Even with the prospect of possible rate hikes later this year, Hodgens said LIMRA expects FIA product sales to remain strong through 2024, possibly eclipsing the record set in 2023. 

Registered index-linked annuities, which combine some features of fixed-index annuities while also offering some downside protection, also saw record quarterly sales. In the second quarter of this year, RILA sales were $16.2 billion, 42% higher than Q2 2023. In the first half of 2024, RILA sales jumped 41% to $30.7 billion.  

Hodgens said many insurance carriers have launched or enhanced their RILA products in the first half of the year, and these product innovations are driving a “more competitive landscape,” signaling the RILA market has significant growth potential. 

In addition, total fixed-rate deferred-annuity sales were $40 billion in the second quarter, 32% higher than the second quarter of 2023 but down 7% from the first quarter of 2024. 

In response to the S&P 500 growing nearly 10% in the second quarter, traditional variable annuity sales improved as well, climbing 18% to $15.6 billion. Because variable annuities are comprised of a portfolio of underlying investments, these annuities are impacted by the stock market. Therefore, if the stock market performs well, variable annuities will become more attractive. 

Despite the Treasury 10-year interest rate average being above 4.4% in the second quarter, LIMRA found that single premium immediate annuity sales fell 9% year over year to $3.1 billion in the second quarter. Meanwhile, deferred income annuity sales soared 62% to $1.7 billion in Q2. 

LIMRA’s U.S. Individual Annuity Sales Survey represents 92% of the total U.S. annuity market. LIMRA will release the top-20 rankings of total, variable and fixed annuity providers for the first half of 2024 in mid-August.  

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