Companies such New York Life Insurance Company and MassMutual Financial Group are reporting an increase of sales in these products, offering the security of guaranteed payouts and serving to calm down rising investor anxiety. At New York Life Insurance Co. states that sales of its immediate fixed-income annuities increased 19% in August from a year earlier. MassMutual Financial Group reports an increase in sales in July and August. In addition, companies report that sales of whole-life insurance, offering predictable savings along with a death benefit, have gotten a boost from recent market volatility.
According to industry officials, the summer’s credit loan mess and the market’s see-sawing have caused small investors to reconsider where they are putting their money, especially those who are recent retirees and those nearing retirement. As they watch their 401(k)s undergo some massive swings, they are searching for more secure footing.
"We always see renewed interest in fixed annuities and whole life when these things happen," says Chris Blunt, senior vice president at New York Life, which markets some products with AARP, the retired persons' group. "People are looking for some guarantees."
Some financial planners, however, feel that these product-safe guarantees come at a high cost. With fixed annuities and whole-life insurance, there's a risk that inflation will erode the value of the returns over the long term. They also caution against putting too much of your assets into fixed annuities, because some growth investments, such as stocks, are necessary. And once funds are invested in an annuity, they generally can't be tapped for any other purpose, such as emergency funds.
Still, insurers and some financial planners say immediate fixed-income annuities can help smooth retirement by providing a regular check each month similar to a traditional pension plan. Other companies that sell these products include American International Group Inc., MetLife Inc. and Hartford Financial Services Group Inc.