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Why Women Should Love Annuities
Not even one-quarter of American women surveyed are knowledgeable about fixed or variable annuities, according to a study from Insured Retirement Institute (IRI). 
Annuities are not the only source of mystery for women. According to the study, women are also shy on knowledge about corporate bonds, exchange-traded funds, government bonds, bond funds, individual stocks and stock mutual funds. Less than half the women surveyed claimed to be very or somewhat knowledgeable about these products.
The annuity finding may be discouraging to annuity professionals, but the IRI researchers see it differently.
This lack of familiarity can set the stage for annuities to be presented as solutions that address concerns many women have about retirement, the researchers said in “Women’s Perspectives on Saving, Investing and Retirement Planning.”
In general, women are “more receptive to financial products, such as annuities” that can help protect against future events, the researchers said, alluding to events that may adversely impact certain areas of their lives that concern them most. 
Greenwald & Associates conducted the survey for IRI in July 2015. It polled 1,000 Americans; they were women and men, ages 25 to 65, who earn at least $30,000 annually.

Annuity Implications 

A possible implication of this for advisors is: If women are informed about how annuities work in retirement, they may take the time to become more knowledgeable about the products. That is, those who don’t know about annuities might begin to show interest if only someone would explain their use and value.
Concern About aspects of the ability to retire
Another implication: Many women may accept advisory guidance on the subject of annuities, since many are open to advisor input. For instance, 43 percent said they want to work with advisors in a “do it with me” or “do it for me” capacity. Only 20 percent described themselves as “do it yourself” investors. 
In fact, nearly half the women (46 percent) said they already seek guidance from a professional advisor. 
This tilt toward advisors is especially pronounced among older women, ages 55 to 65. More than half (58 percent) of this age group said they personally work with a professional advisor “very often” or “sometimes.” 
Some younger women (39 percent of those between the ages of 25 and 39) also said they work with a professional advisor.  But 70 percent of this group said their top resource was “friends and family.” This suggests that the annuity discussion with the younger segment 1) could be harder to open up or 2) will have to be run by the younger woman’s personal network for an A-OK. 
Significantly, older and younger women also differ in the knowledge level they claim to have about annuities. One-third (33 percent) of women ages 55 to 65 said they are very or somewhat familiar with fixed annuities, for example, while half as many (15 percent) of those in the 25-39 age group said the same. 
And while 29 percent of the older women claimed knowledge of variable annuities, only 15 percent of the younger group said the same.
By extension, if advisors bring up the topic of annuities, especially with older women, they have a chance of being heard. That makes sense because women in the older group are near or at retirement, a point in time when the annuity’s multiple retirement features are head-turners.
But a word to the wise on that point: Some findings in the study suggest that educational discussions with women need to be effective and interactive. 
For instance, 58 percent of the women said “an advisor’s ability to explain concepts clearly without talking down to me” is extremely important. Only 35 percent of men said the same. Also extremely important to women is that the advisor listen well (60 percent), be responsive (55 percent), and talk to them and not just their spouses (60 percent).

Life Insurance Surprise

One surprise in the study results is that life insurance was near the very top of the list of investment products about which women said they are knowledgeable. Fully 64 percent of the women claimed to be very or somewhat knowledgeable about this product line. 
Only two other product categories came in higher: a “savings account” (92 percent) and “a 401(k), 403(b) or 457 plan” (67 percent).
Not even certificates of deposit or stock mutual funds outranked life insurance on this knowledge metric.  
This is surprising, considering that women’s knowledge of annuities ranked so much lower (no more than 20 percent) in the same survey.
The report offered no insight as to why life insurance ranked so high. However, it is possible that life insurance industry messaging has played a role. For example, the women may have heard how wives tend to outlive their husbands and how the life insurance proceeds help families move on after a breadwinner’s death. Or the women may have built up life insurance knowledge courtesy of the industry’s literacy initiatives over the years. 
Or maybe the advisors for the women have been successful at focusing more attention on life insurance than on many other products (including annuity products).
Whatever the reason, the prominence of life insurance on the knowledge metric may be a booster shot, not a drawback, for annuities. The advisor might, for example, approach the woman’s life insurance knowledge as a foundation on which to branch out into discussion of how annuities might fit into her portfolio too, if needed.

Women’s Concerns

Conversation about annuities may resonate with women for another reason as well. The reason is that annuity products can help address some of the concerns that women have, including retirement concerns. 
In the study, 54 percent of the women said they are concerned about saving enough for retirement; 53 percent are concerned about being able to afford their desired lifestyle throughout retirement; and 54 percent are concerned about being able to stop working when they want.  
The tax-deferred savings features of annuities, along with the annuity’s guaranteed retirement income options, may be of strong interest to these women.
In other financial areas, 62 percent of the women said they are concerned about the value of their investment decreasing. A fixed annuity or a variable annuity with embedded guarantees may be of interest here.
Also, more than half (58 percent) voiced concern about inflation. The tax-deferred buildup in annuities may be of interest here. So might the various strategies inside some of the products to help hedge the inflation risk, as well as the option in some annuities that provides for cost-of-living increases during the payout phase. 

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at [email protected] [email protected].

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