In addition, although 46 percent of Americans say they are worried about running out of money in retirement, 65 percent say they are not familiar with annuities.

And although 49 percent said they would be willing to commit a portion of their savings to a product that would provide a monthly income, such as an annuity, only 28 percent indicated they have a favorable impression of annuities. Only 31 percent have sought advice on how to translate savings into lifetime income, and 44 percent were not sure if receiving monthly income in retirement was an option in their retirement plan.

Fully 62 percent have not even done an analysis of how to translate their savings into a monthly income, the survey indicated.

Not as chilling as it sounds

If taken as an end-of-story outcome for the future of annuities, the findings could be considered chilling news for the annuity industry’s sales prospects. However, the dichotomy identified in the survey is not the end of the story.

Just this week, LIMRA Secure Retirement Institute (LIMRA SRI) posted the year-end 2014 estimated sales results for the individual annuity industry. Not only did total U.S. annuity sales grow by 3 percent in 2014, according to the figures, but sales of annuity products that are designed expressly for guaranteed income streams rose by the double-digits.

The double-digit increases suggest that the annuities designed for lifetime income have been resonating with at least some consumers, the “puzzle” notwithstanding.

In fact, immediate income annuity sales jumped by 17 percent in 2014, to $9.7 billion from $ 8.3 billion in 2013 and $7.7 billion the year before that.

And deferred income annuities (DIAs), which start their income stream several years after purchase, saw sales jump by an even higher percentage — by 22 percent to be exact — to $2.7 billion, LIMRA SRI said.

The DIA sales total might seem paltry compared to the industry total for all individual annuities of nearly $236 billion in 2014. However, DIAs have been actively sold for only a few years, and yet their sales have soared from $1 billion in 2012 and $2.2 billion in 2013 to the new level of $2.7 billion. It’s the upward bound momentum that makes the numbers significant from a lifetime income perspective.

That’s not all. Sales of fixed index annuities (FIAs) leapt forward by 23 percent last year to a total of $48.2 billion, LIMRA SRI reported. That’s up from $39.3 billion in 2013 and $33.9 billion in 2012.

The FIA sales growth is pertinent to the lifetime income discussion because the majority of FIAs are sold with a guaranteed lifetime withdrawal benefit (GLWB) rider attached, when available. The riders ensure a lifetime income stream continues even if the account value is exhausted from withdrawals made according to terms of the rider.

What it means

TIAA-CREF is taking its survey findings as an indication that the retirement industry needs to do some work to help increase consumer understanding of annuities.

“For many Americans, annuities are often unknown or misunderstood,” Ed Van Dolsen, president-retirement and individual financial services at TIAA-CREF, said in a statement. That’s “unfortunate,” since annuities are “the only way to generate retirement income that cannot be outlived.”

His suggestion is that consumers “should consider working one-on-one with a financial advisor to learn more about the investment solutions that can help them achieve their long-term financial goals.”

In addition, he said that “individuals will feel more confident in their retirement plans if they know that their basic expenses will be covered by guaranteed income. Therefore, any retirement-planning conversation should include a discussion of strategies for generating lifetime income, and how annuities can help create financial security.”

A couple of annuity positives came from the survey too:

• Nearly half (48 percent) of older people, ages 55 to 64, said they are familiar with annuities. (By comparison, only 26 percent of younger adults, ages 18-34, said the same.)
• Nearly half (48 percent) of the survey group said that having guaranteed income to cover living costs should be the primary goal for their retirement plan. That is up from 34 percent in 2014, so awareness is up.

Conducted in January by an independent researcher, the survey represents a random sample of 1,000 adults nationwide, TIAA-CREF said, noting the survey made no reference to TIAA-CREF products or services.