A survey of retirees and near-retirees released today
demonstrates the comparative financial security today’s retirees enjoy, in
contrast to the expectations of workers who will be retiring in the years and
decades to come.
The study was conducted by the Insured Retirement Institute
(IRI) in partnership with American Equity Investment Life Insurance Co. and
Eagle Life Insurance Company.
Several key findings from the survey illustrate significant
differences between current and future retirees:
46% of near retirees do not expect income from a defined
benefit pension compared to only 23% of retirees. Notably, many respondents may
mistakenly believe their defined contribution plan (401k, 403b, etc.) is the
same as a pension. Bureau of Labor Statistics data shows only 16% of
private-sector workers have access to a defined benefit pension plan.
65% of retirees believe their Social Security benefits and
pension provide adequate income. Only 40% of near retirees believe this will be
the case.
Eight in 10 near-retirees fear that costs related to
retirement medical care will be overwhelming, prompting concern about the
adequacy of their retirement income.
“Preparing for and managing retirement risks such as
exhausting financial resources and being hit with significant health care
expenses can be complex, challenging, and frankly daunting even when markets
are generally favorable,” said Frank O’Connor, IRI Vice President, Research and
Outreach. “But the risk of running out of money during retirement has been
highlighted in recent days as a result of extreme market volatility that
complicates investment decisions. Retirees and near-retirees alike often turn
to financial advisors for help and are more likely to look to their advisors
for information and assistance in financial product selection than other
sources.”
Seven in 10 survey respondents believe financial advisors
are trustworthy.
More than half want to obtain financial product information
from a financial advisor, compared to 37% preferring recommendations from
family or friends. Other sources were much less preferred, such as e-mail
(26%), mailed brochures (19%), and advertising (12%).
Six in 10 want advisors to select products for them but
explain them thoroughly. Comparatively few survey respondents are interested in
either a do-it-yourself approach (17%) or giving the advisor full discretion
(6%).
The survey found that the concept of an annuity, an
investment option that can provide guaranteed lifetime income, resonates
strongly with retirees and near-retirees. However, many lack knowledge about
the product and are more likely to reject it when called an “annuity.”
Nine in 10 say they are likely to purchase an annuity when
described by features such as guaranteed lifetime income and principal
protection.
Two-thirds say they would purchase a guaranteed lifetime
withdrawal benefit, a feature that is only available with annuities.
However, only 45% say they would purchase an annuity when no
context is provided for the value, indicating consumers often do not connect
annuities by name with the benefits they provide.
“Annuities can be an integral and important part of a
retirement income plan, particularly for individuals without defined benefit
pension plans to supplement Social Security benefits,” O’Connor said. “Annuities
are the only financial product that can guarantee lifetime income, as well as
provide protection against the extreme market volatility we see in equities
markets today.”
Wayne Chopus, IRI President and CEO, said IRI repeatedly
sees in its research that consumers value both the benefits offered through
annuities and the expertise and guidance provided by financial advisors. “When
consumers are shown how annuities are integrated into a comprehensive financial
plan that helps them achieve their retirement dreams and addresses the risks
they face, we are providing precisely the guidance and support they
value,”Chopus said.
The November 2021 survey of 2,000 respondents was evenly
divided among workers 15 or fewer years from planned retirement age and those
who have been retired for at least five years. All survey respondents reported
at least $100,000 in retirement savings, not including the value of real
estate.
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