Those
who work with an adviser are most likely to buy an annuity.
Monthly guaranteed income is the most important
single trait that aging baby boomers look for in a retirement investment,
ranked No. 1 or No. 2 by 41% of participants in the latest annual survey of
retirement expectations and preparedness conducted by the Insured Retirement
Institute.
The eighth annual update of boomers'
retirement expectations showed some marked improvement in key retirement
readiness factors, such as increasing account balances due to market gains and
aggressive saving by some of those who are still employed. About 40% of the
more than 800 respondents classified themselves as fully retired.
Among the 58% of boomers with retirement
savings — a slight improvement from last year — 43% have $250,000 or more
saved, compared to only 32% who reported that level of savings in 2017.
But overall retirement confidence is still
very low. Only 25% of boomers believe they will have enough money in
retirement. And many are running out of options to make up for lost time. An
estimated 26 million boomers have already turned 65 and the remaining 50
million will do so over the next 10 years.
Seven in ten boomers say they expect Social
Security to be a major source of retirement income, compared with only 28% who
plan to rely on an employer pension as a significant source of income and 22%
who anticipate that their defined contribution retirement plan will provide
substantial income.
In a disturbing trend, 40% of those with
401(k) and IRA balances seem unsure of how they turn those savings into
retirement income, reporting they would tap the accounts "as needed."
Without a drawdown plan, many could run out of money.
Boomers who have little or no savings may
have to find creative ways to supplement their Social Security benefits, either
by boosting their income through continued work or side hustles or by reducing
their costs through shared housing or relocating to foreign countries with a
lower cost of living, the report concluded.
"Whatever happens over the years the
boomers are retirement age, it will almost certainly not be the retirement of
the silent generation," the report said. "Most will need a lot of
work and assistance to get there."
Working with a financial adviser continues to
be highly correlated with retirement preparedness: 79% of boomers who have a
relationship with an adviser have at least $100,000 saved for retirement versus
only 48% of those who do not work with an adviser, the report said.
Annuity ownership is also an indicator of
retirement readiness, according to IRI, a coalition representing the nation's
largest insurers, asset managers, broker-dealers and financial professionals.
Seven in 10 boomers said it is very important
for retirement income to be guaranteed for life, yet only 14% plan to purchase
an annuity with a
portion of their 401(k) or IRA and only 3% have done so.
Those who work with a financial adviser are
more likely to purchase annuities. Nearly 85% of boomers who work with a
financial professional report that their adviser has either included using annuities
in their written financial plan or discussed the use of annuities to provide
guaranteed retirement income.
Even boomers who believe they are financially
well-prepared worry that future changes to Social Security could reduce their
income and health care expenses could
bust their budgets.
"Perhaps the single most treacherous
wild card Boomers may face in retirement is the trajectory of their personal
health care expenses," the report warned. "Contrary to what many
believe, Medicare does not cover many expenses commonly incurred at older ages:
hearing aids, vision care and dental care, to name a few."
The report identified several nontraditional
areas of financial planning where advisers could educate their clients and
expand their practices, including Medicare supplemental insurance, long-term
care planning, preparing for the possibility of cognitive decline and taking
steps to prevent elder financial abuse.
"This is a real opportunity for advisers
to add value to their clients as planning for health care and long-term care
expenses are key areas where Boomers have low confidence in their
preparedness," the report said.
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