The FIDx Five: Annuity Market Growth

Retirement, Annuity, & Fintech Insights 

In this week's edition of The FIDx Five, we look at the growing US annuity market, changes in current spending and future planning amidst market volatility and rising costs, and how Gen Z is ahead of the curve with their retirement saving. 

Annuity Market Growth
The US annuity market is expected to reach $298.70 billion in sales by 2026. This would be a 29% increase from 2021. Drivers for growth include an aging population, rising inflation, and the growing role of technology in establishing holistic planning. (GlobeNewsWire, August 9th, 2022, US Annuity Market to Reach $298.7 Billion by 2026, Link)

Gen Z Saving Early
Young Americans have become increasingly interested in saving for retirement. When comparing Gen Z and millennials retirement savings at the same age, we see that Gen Z is saving at a higher clip. About 16% of Gen Z are investing in their 401(k) compared to 11.4% of millennials at the same age. Furthermore, the average account balance for Gen Z is $2,500 more than the average account balance for millennials at the same age. (Kristen Beckman, August 12th, 2022, Housing, health care top list of expenses for retirees, Link)

Retirement Spending
In a study done by Annuity.org, it was found that Americans over the age of 65 spent an average of $47,579 on living expenses in 2020. The main chunk of the expenses came from housing and health care. On average, 36% of spending was on housing, and $6,668 on health care. (Kristen Beckman, August 12th, 2022, Housing, health care top list of expenses for retirees, Link)

Changes in Spending & Saving
Rising costs and market volatility have changed the way American workers are living today and planning for the future. 79% of American workers have recently changed spending habits, and 44% of American workers have altered their 401(k) investments. Some of the changes in spending habits include paying off debt more slowly, buying cheaper products, and saving less for retirement. People are also concerned about their retirement funds running out once they leave the workforce – on average, the current working American’s retirement savings will last them 23 years. (John Sullivan, July 26th, 2022, Inflation Wreaking Havoc With Workers’ Retirement Saving, Link)

Retirement Obstacles
According to Schwab Retirement Plan Services, inflation has officially become the number one obstacle to saving comfortably for retirement. Schwab’s annual survey with 401(k) plan holders asked participants to name obstacles that are negatively affecting retirement planning. 45% cited inflation, 35% cited keeping up with monthly expenses, 33% cited stock market volatility, and 33% cited unexpected expenses. (John Sullivan, July 26th, 2022, Inflation Wreaking Havoc With Workers’ Retirement Saving, Link)

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