The next generation of annuity buyers

Despite record-breaking annuity sales in recent years, one long-standing challenge remains. Many Americans still underinvest in products designed to address one of the biggest retirement risks: running out of money. Economists have referred to this gap as the “annuity puzzle.”

Research suggests that may be starting to change.

What is the “annuity puzzle”?

The annuity puzzle refers to the gap between the financial benefits annuities can provide and the relatively low adoption rates among consumers. For decades, the “annuity puzzle” has challenged the retirement industry. Even though annuities can help provide guaranteed income for life, many consumers still choose not to buy them. To better understand why, in 2019 Athene commissioned a white paper, Solving the Annuity Puzzle: A Behavioral Analysis, from UCLA Anderson School of Management researchers. Their research explored the behavioral and psychological factors that shape annuity decisions.

Athene’s new white paper, authored by Craig R. Fox of UCLA Anderson School of Management and Gregory Samanez-Larkin of Duke University, builds on that work by examining how those same behavioral biases affect different generations, including millennials, Generation X and baby boomers. 

The new white paper, Solving the Annuity Puzzle for New Generations, explores how millennials, Gen X and baby boomers think about retirement risk — and how behavioral insights can help financial professionals connect with the next wave of annuity buyers.

One finding stands out. Gen X and millennials may be more interested in annuities than many financial professionals expect.

  

Download the white paper

Explore behavioral insights that can help financial professionals connect with the next wave of annuity buyers.

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Generational retirement trends: key takeaways

• Many Americans still aren’t including guaranteed income strategies in their portfolio to help address the risk of running out of money in retirement.
• Gen X and millennials may show more annuity interest than expected. 70% of Gen X expressed interest in them, and 76% of millennials were at least somewhat interested, by comparison, 61% of baby boomers expressed similar interest.
• One of the biggest drivers of interest in annuities is understanding. Demand may not be the real challenge. It may be the way annuities are explained. Simplifying explanations and verifying client understanding may give financial professionals an advantage.
• Baby boomers, Gen X and millennials exhibit different retirement planning behavior. As a result, they need different conversations, messaging and communication channels. Financial professionals who recognize the distinctions may have stronger client conversations and see higher annuity adoption.
• Athene’s new white paper explains behavioral insights and practical strategies financial professionals can use to reach, engage and help convert the next wave of retirement clients.

A new generation enters the retirement conversation

Over the next two decades, trillions of dollars are expected to move from baby boomers to Gen X and millennials.^* These generations have different financial experiences, use different tools and approach retirement planning in distinct ways.

The research, based on a survey of 946 U.S. adults, found interest in annuities is already strong among these younger cohorts.

This suggests demand may not be the real challenge.

Instead, the gap may come down to how annuities are explained and presented.

As the paper explains, the next generation of clients requires different conversations, different messaging and often different communication channels.

What barriers prevent annuity adoption?

Different generations may approach retirement planning and react to behavioral barriers differently. The research highlights four types of uncertainty linked to these barriers clients may face when planning for retirement:

Four behavioral barriers shape annuity decisions

Different generations may approach retirement planning and react to behavioral barriers differently. The research highlights four types of uncertainty linked to these barriers clients may face when planning for retirement:

Longevity uncertainty

How long will I live?

Spending uncertainty

How much money will I need?

Investment uncertainty

Could I do better managing money myself?

Decision uncertainty

Do I fully understand these products?

Each generation experiences these uncertainties differently which can shape decisions they make about adding annuities to their retirement strategy. Recognizing the generational distinctions can help make conversations with your clients more relevant and effective.

How do millennials and Gen X approach retirement differently?

These insights highlight how millennials, Gen X and baby boomers tend to respond to common behavioral biases, including ways you can adapt your approach.

Baby Boomers

Mindset: Stability and security

• May underestimate lifespan
• Focused on health care costs
• Prefer guarantees
• Simplify decisions

Financial professional focus:
Emphasize income that lasts and protection from rising costs.

Gen X

Mindset: Balancing growth and responsibility

• Uncertain about longevity
• Managing multiple financial priorities
• Balancing growth and protection
• Wants clarity in options

Financial professional focus:
Connect income planning to real-life financial pressures.

Millennials

Mindset: Uncertainty and flexibility

• Most uncertain about lifespan
• Facing debt and cost pressures
• Influenced by market volatility
• Prefer simple, digital-first experiences

Financial professional focus:
Simplify messaging, highlighting flexibility and income stability.

These behavioral insights help explain why annuity demand exists — but often fails to turn into purchases.

How can financial professionals simplify annuity conversations?

One of the most important findings in the research is that product understanding strongly influences annuity interest.

Even among highly educated participants, only about two out of five respondents said they understood annuity products fairly well or better.

In other words, complexity — not lack of demand — may be the bigger obstacle.

This means financial professionals who simplify explanations and verify understanding may have a significant advantage.

Adapting to the next generation of clients

Within the white paper, researchers highlight several considerations for engaging Gen X and millennial clients:

Four practical ways financial professionals can better engage Gen X and millennial clients

Within the white paper, researchers highlight several considerations for engaging Gen X and millennial clients:

Simplify product explanations

Clients respond better to clear descriptions of guarantees and income benefits than technical details.

Frame annuities around income security

Position annuities as a way to create reliable retirement income instead of an investment alternative.

Build trust through transparency

Trust in financial institutions is one of the strongest predictors of annuity interest across generations.

Use digital engagement

Gen X and millennials are more likely to research financial products online before speaking with a financial professional.

Incorporating these changes into client conversations with Gen X and millennial clients may help convert their interest into real retirement planning decisions.

Incorporating these changes into client conversations with Gen X and millennial clients may help convert their interest into real retirement planning decisions.

Turning interest into opportunity

The biggest takeaway from the research is simple: the annuity market is evolving.

Millennials and Gen X are not reluctant buyers. They are different buyers, with different expectations and decision drivers.

Financial professionals who adapt their messaging, simplify complexity and meet clients where they are, both digitally and behaviorally, may be better positioned to serve this growing market.

Download the white paper

To learn more about the behavioral insights shaping the next generation of annuity buyers, download the full white paper:

Solving the Annuity Puzzle for New Generations: Behavioral Insights for Millennials, Gen X and Baby Boomers

Download the white paper

Explore practical strategies for reaching, engaging and converting the next wave of retirement clients.

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