Retirement Products Need To Adapt To Boomers Needs, Experts Say

By

New York

Retirement is the new, big opportunity in the financial services industry, and insurance companies are well positioned to supply what is expected to be the larger-than-ever demand for such products. This idea was suggested more than once at a recent seminar held by Ernst&Young, New York.

Shaun Matthews, chief marketing officer of ING U.S. Financial Services, said this is true because insurance is the only industry with a regulatory structure that allows guarantees around income, so that a carrier can assure consumers a guaranteed income stream in retirement.

This is “great news,” for insurance companies, he said, because annuities are much more flexible than they have been in the past, allowing for a combination of products rather than one product. So, a consumer interested in an annuity would not have to put all of her assets into that product. Rather, she could put a portion of her assets into an annuity and invest the rest in other products.

“It creates more certainty you wont outlive your income,” Matthews said.

And this is key to the group of people redefining what retirement is, said psychologist and gerontologist Ken Dychtwald, who is the founder of Age Wave.

Baby boomers have never followed in the footsteps of the generation that came before them, referred to as the “greatest generation,” he said. So, in order to remain competitive, financial institutions cannot continue selling the same retirement products that the parents of boomers bought. They need to create new products that fit the lifestyle choices of boomers, he said.

While older adults typically viewed life in three phases–youth, work, then a short retirement before death–boomers will likely go through these phases repeatedly in their lifetime and even at the same time. They will likely study, marry and work, then go back to school and start a new career or work part-time and possibly remarry, Dychtwald said.

Boomers tend to see their lives as a fluid journey and dont view retirement as a target date for ending their working lives, he said.

Financial services institutions that do not want to miss a trend should look at how boomers want to live in retirement and create products that will aid in achieving the desired lifestyle, Dychtwald said.

He presented findings from a study that uncovered four mindsets held by boomers. For the study, “Re-Visioning Retirement,” sponsored by AIG SunAmerica, Los Angeles, and conducted by Harris Interactive, Rochester, N.Y., 1,000 people 55 and older were asked a range of emotional, psychological, lifestyle and financial questions. Four distinct segments emerged.

Twenty-seven percent of those questioned, called “Ageless Explorers” personify a new ideal of retirement, the study says.

“Retirement can be seen as an exciting new phase in their lives as they would rather be too busy than risk being bored,” according to SunAmerica literature on the study. “These retirees have high levels of education and the highest net worth. They have saved for retirement an average of 24 years, feel prepared financially for retirement and appear psychologically prepared to make the most out of this stage of their lives.”

When asked when they think they might start feeling old, Ageless Explorers said “never,” Dychtwald said.

Nineteen percent of those studied are termed “Comfortably Contents.” According to the literature, they “seek to live the traditional retirement life, where they relax and enjoy their golden years. They arent as interested in work or contributing to society, and are less willing to risk feeling stressed in retirement.

“They saved an average of 23 years and spend their time on travel and other recreational activities.”

When asked when they might start feeling old, most said “soon,” Dychtwald said.

“Live for Todays,” 22% of those studied, “aspire to many of the same new retirement ideals laid out by Ageless Explorers, and they may even be more interested in personal growth and reinvention,” the literature says. “Unfortunately, they appear to have been focused on living for the here and now and are burdened with worry that they did not adequately prepare financially for retirement. This group saved an average of only 18 years, and they are likely to continue working in retirement.”

The greatest number of those surveyed–32%–fall in the “Sick and Tired” category. These boomers “are living the worst possible retirement scenario,” the literature says. “Less educated and with fewer financial resources, they have low expectations for the future. They are more likely to have been forced into retirement by poor health, took few steps to prepare for retirement, and saved very little for the least number of years–16.”

When asked whether they might want to volunteer in the community or perhaps go back to school, the people in this category were not interested, Dychtwald said.

The study also suggests that boomers want more than an investment portfolio when heading for retirement–they want guidance. So, even though boomers tend to gather information on their own, they remain open to guidance in defining their retirement goals.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 18, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.