Annuity Market Cooling
Purchasing trends are mirroring those from the 2008 recession, with decisions being driven by a growing concern about stock market volatility. Despite these fears, the Federal Reserve’s decision to raise interest rates to reduce inflation could positively impact purchasing annuities in 2023.
Although the Federal Reserve may not directly impact their interest crediting rates, it can benefit insurance companies. This is possible because insurance companies can now offer higher interest crediting rates.
As a result, you’re able to earn more on your investment. So, as soon as you’re ready to retire, you’ll already have more in your account.
Annuities 2023 Outlook
Making big financial decisions in a constantly changing market is scary, especially regarding long-term retirement planning. And if you have limited financial knowledge, you’re going to be even more hesitant.
Interest rates are on the rise, and debt is becoming more expensive. So, it makes sense to be cautious. But when it comes to risk, annuities 2023 are a safe investment, making them a low-risk product with a higher profit reward.
According to Todd Giesing, the assistant vice president at LIMRA Annuity Research, equity market declines and rising interest rates are causing investors to seek protection. As a result, fixed-rate deferred and fixed-indexed annuities have reached record levels.
LIMRA predictions for 2022 stated that FIA sales were to begin increasing until 2026. But because a high sales bar was set, it’s possible that the momentum may diminish within the next few years.
Significant demographic changes are one of the major contributing factors to the industry’s appeal. As a result of an especially erratic and volatile market, many consumers are staying away from directly investing in equities.
Are Annuities Currently a Good Investment?
The Federal Reserve raising interest rates won’t necessarily have a huge impact on whether annuities are a good investment. It’s important to remember that annuities are long-term products.
In addition to tax benefits and a guaranteed retirement income, they also accrue. This is an ideal investment for those seeking to grow their nest egg.
With that said, you will need to consider your unique financial situation and goals to determine if purchasing annuities in 2023 is the right investment for you. For instance, if you’re more interested in reaching your short-term financial goals, other investment options may be suitable for fast growth.
However, you can expect annuity rates to be fixed between 3.60% and 5.25% for a term of 2 to 10 years. Therefore, purchasing an annuity right now can be an asset if you’ve already taken advantage of other retirement options. But you can always check in with a financial advisor to weigh your best options and make a confident investment decision.
Get Started with the Right Annuity
If you already have an annuity or if purchasing annuities in 2023 is one of your goals for the year, rising interest rates can be beneficial. That’s because a rise in interest rates helps your funds accumulate more quickly, providing you with more money to enjoy once you retire.