Annuity sales rise, buoyed by market fears and higher interest rates. What to know before you buy

cnbc.com:

Annuities are on track for a banner year as consumers flee stock volatility and insurers offer more attractive rates.

Limra, an insurance industry group, forecasts annuity sales of $267 billion to $288 billion in 2022, eclipsing the record ($265 billion) set in 2008. Consumers pumped $255 billion into annuities last year — the third-highest annual total, according to Limra.

There are many types of annuities. They generally serve one of two functions: as an investment or as a quasi-pension plan offering income for life in retirement.

Insurers offer buyers guarantees that hedge risk like market volatility or the danger of outliving savings in old age.

Recently, consumers have ramped up spending on annuities in categories that suggest buyers are investors seeking to protect money from gyrations in stocks and bonds, and less so seniors seeking steady retirement income, according to industry experts and financial advisors.

The S&P 500 Index is down more than 13% this year as investors digest concerns about economic growth and the war in Ukraine. The Bloomberg U.S. Aggregate bond index is down more than 9%. Bond prices have been pressured as the Federal Reserve raises its benchmark interest rate to tame inflation. (Bond prices move opposite to interest rates.)

«It's a fear trade,» Lee Baker, a certified financial planner based in Atlanta and founder of Apex Financial Services, said of higher annuity sales.

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Insurers have also offered consumers better payouts and guarantees on all types of annuities amid rising interest rates,