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The financial services community has been a virtual beehive of boomer-related activity this year.

All year long, reports have been coming out from various wings of the industry, pointing to the looming retirement funding crisis many baby boomers–those 78 million Americans who were born between 1946 and 1964– could face within a few years (see chart).

Some financial providers have also debuted cutting-edge programs and products to address the needs of this market. This article looks at a sampling of those strategies.

This is one of several articles NU has published in 2002 on the financial industrys interest in the boomer demographic. Sources contacted for these articles say they are focusing on the financial needs of boomers–in particular, the retirement needs of older boomers now aged 46 to 56–and of any others who may share those same needs, regardless of age.

“These individuals have a lot of assets,” explains Susan Lotwin, and they need information and products to help manage them. She is vice president of strategic planning for Transamerica Retirement Services and the brand new Transamerica Center for Retirement Studies, a research and information resource, both of Los Angeles.

Boomers, in particular, need this help, she says, “because they dont have the luxury of time to help them make up for the wealth they lost during the recent recession and stock market downturn.”

They also are not aware of some of the issues that are before them, contends Lorry J. Stensrud, CEO of Lincoln Retirement, the Ft. Wayne, Ind., annuities operation of Lincoln National Life Insurance Company.

“Weve found that most people underestimate how long they will live and how much money they will need in retirement,” says Stensrud.

Further, although most know they will need to stay invested in equities when they are retired, he says, Lincoln has found people want to have products that ensure they can move money into something having guarantees during periods when the stock market is not performing well.

Whats more, Lincoln has found that a lot of independent financial planners and advisors are not actively working to help boomer clients plan their retirement income. In fact, many do not even know much about annuity products or how to use them to create income in retirement, says Stensrud.

The upshot, for Lincoln, Transamerica, ING US Financial Services, Atlanta, and certain other insurers, has been a decision to provide various educational initiatives to help raise awareness about the retirement issues that boomers and all people face.

Several factors–including increased longevity, personal financial responsibility for retirement funding and lifestyle changes–have created a new retirement cycle, stresses Stensrud. People may retire, start work elsewhere, go to school, retire again and so on.

People need to plan for this, he says, especially since “all signs indicate that about 20% of the population will be around to celebrate their 100th birthday.” The goal, for insurers, is to find a way to help people maintain a comfortable standard of living throughout the retirement years, he says.

His own companys response is twofold: 1) Lincoln is marketing a variable income annuity–Income for Life–that contains liquidity and “control and flexibility” features that Stensrud says research shows people want in income products; and 2) the company has begun an intensive education campaign thats designed to “ingrain” messages about the growing need for retirement income planning and how income annuities can meet that need.

“Customers and advisors crave this training and education,” says Stensrud. “They want to know about the new retirement lifestyle, how long their money will last, where to put their money and so on.”

This is a whole new mindset for the VA business, he claims, explaining that “many VA companies forgot about training and education during the 1990s.”

Today, he says, the industry has got to get the (income) products and concepts “ingrained in the system,” so that as boomers enter retirement, the advisors and distributors will be prepared.

Transamerica Life and Annuity Company has designed an educational initiative, too. For example, it recently opened up its new Retirement Center, which is essentially a think tank that provides information and resources about retirement funding to the public, free of charge.

“We think it will help move people from a state of concern or inertia concerning their retirement to one where they take action,” says Lotwin.

In addition, earlier this year, Transamerica started offering participants in Transamerica 401(k) plans (with $500,000+ in assets) two free services. One is Advice Solutions, an online tool that analyzes the persons investment and savings information [401(k) and other], forecasts future values, and suggests a customized asset allocation strategy. The other is Retirement Plan Assessment, an annual review, mailed to the home, showing savings history and the impact of alternative investment strategies on their average 401(k) retirement nest egg.

“If boomers are not yet aware of the impact the stock market downturn had on their savings and their future retirement, this will send a blunt message,” Lotwin says.

The information is “extremely compelling,” she maintains. It is also supportive, she contends, because the annual assessments the company sends to participants also contain suggestions on what to do to make things better.

ING, meanwhile, has launched a “Financial Horizons Advisory Program” that, for a flat fee, delivers retirement counsel and advice to individual consumers.

Insufficient planning can “significantly compromise” a persons retirement experience, contends Shaun Matthews, president of ING Financial Horizons. The new program aims to help avert this. Its advice covers several investment solutions, including non-ING products.

On another front, some companies are positioning various products for the boomer–or pre-retirement–market.

Phoenix Companies, Hartford, Conn., for example, has introduced Phoenix Edge-SPIA, a fixed single premium immediate annuity designed to meet income needs of affluent clients nearing retirement.

“This can be a real asset to baby boomers who are facing todays pressures of stock market volatility, diminishing 401(k) assets and longer life spans,” says Mark R. Tully, senior vice president-annuity distribution and sales at PHL Variable Insurance Companies. Thats because those who buy the SPIA will know exactly what their payments will be, he says.

Other life insurers are eyeing the boomer market, too. For example, Fidelity & Guaranty Life Insurance Company, is targeting people in the 40 to 60 age range with its new WealthMaster Classic Universal Life policy, reports John Phelps, vice president-life brokerage.

“This UL is for discerning boomers,” he says, noting that the product attracts a lot of big cases. Why so? The policy has guarantees this market wants, says Phelps, who is based in Carmel, Ind. Examples include a no-lapse premium guarantee to age 100 (guarantees the death benefit to age 100) and a no-cost extended maturity option (keeps the death benefit in force forever, as long as there is $1 of cash value at age 100). It also has a surrender charge waiver (for withdrawal of excess premiums over the target premium) and a “catch-up provision” to help keep the death benefit guarantee in force.

“The underwriting requirements are pretty liberal, too,” Phelps adds.

At Zurich Life, Schaumburg, Ill., the big change has been the addition of a UL policy–Zurich Lifetime UL–to its life insurance product line. The company has traditionally focused on term life offerings, with premium guarantees of 10, 15, 20 and 30 years.

Now, says Jeff Achtstatte, chief marketing officer, “weve recognized that, as boomers get older, their needs change, and often they need more permanent life insurance, not just term insurance.” They are asking for life insurance for the rest of their lives, he says. As a result, Zurich has decided it needs to provide a way for clients to meet those needs. Its answer, the new UL, is a flex-premium plan with a 10-year minimum premium and an extended guarantee of death benefit to age 100.

Allianz Individual Insurance Group, Minneapolis, is also pushing the older boomer envelope. “We are developing a portfolio of life insurance products for the mature and senior market,” reports President and CEO Patrick M. Foley.

“We already have products for the younger Generation X market and the younger boomer market,” he says, so now the company is developing designing for the older ages. One example is a new UL. Soon, the company will also debut a new immediate annuity that “will look very different” from traditional immediate annuities because “it is not irrevocable,” Foley says.

Banner Life Insurance Company, Rockville, Md., is also marketing a UL with a guaranteed premium to age 100 and a built-in extended maturity option. Called Continuity Lifetime UL, it is designed for “high-end” boomers in their 40s and 50s, says David J. Orr, senior vice president and chief actuary. “Its a good product for someone who wants permanent life insurance protection,” he says.

Twelve thousand people are turning 50 every day, points out Lincolns Stensrud. Within the next few years, many will be looking to retire or make big life changes. The retirement market is already big today, he says, “but the boomers will be the biggest retirement market ever.”

Research On Boomers

A sampling of studies done in 2002 on boomer and/or pre-retirement planning issues

In January, Allianz Life Insurance Company of North America, Minneapolis, published results of two surveys showing that the majority of baby boomers and generation X-ers say their financial well being is a higher priority than their mortality. The surveys covered 800 consumers in 2001 and 400 consumers in 2002, respectively, all in the 25 to 45 age group. Further, it found that, in event of a serious financial setback, 58% believed they would need financial assistance after less than six months.

In May, a researcher from the Employee Benefit Research Institute, Washington, D.C., warned that it is not clear how boomers are going to pay for their retirement. Citing new pension plan participation data from the U.S. Census Bureau, EBRI senior research associate Craig Copeland said that even among U.S. residents making at least $50,000 in 1993 dollars, in 1998, 25% were not participating in a pension plan. The nation has to get serious about planning for the retirement of baby boomers, he concluded.

In July, AIG SunAmerica, Los Angeles, a member of American International Group, said a study it had commissioned found that traditional notions of retirement now reflect a lot of diversity in retirement lifestyle and needs. Conducted by Harris Interactive and Dr. Ken Dychtwald, a gerontologist, it polled 1,003 people age 55 and up. While 27% expect to be too active in retirement to be bored and 19% predict they will be comfortably content, the survey said the remaining 54% worry about, or anticipate problems with, their future finances.

In August, The Economic Policy Institute, the Washington, D.C., nonprofit think tank, injected some concern into the discussion when it reported that the stock market bubble burst early in this decade has “left the average family facing the prospect of having only 43% of the income they need for an adequate retirement.” Further, it reported that the ratio of household debt to income grew from 72% at the end of 1992 to 83% by March 2001, and said “it will take the average household over 30 years to recover the wealth lost in 2000 and 2001.”

In September, ING US Financial Services, Atlanta, came to a similar conclusion. A survey it commissioned of 200 people aged 50 to 70, having $100,000 to $500,000 in investable assets, found that 75% either do not understand, or havent yet considered, how to plan successfully for the withdrawal of their retirement savings or to maximize their available options. Conducted for ING by KRC Research, this survey also found that 69% have no plan in place for their “retirement paycheck.”

In October, Manulife USA, Boston, released survey results that reinforced concerns about boomer finances. In a telephone survey of 400 U.S. workers over age 21, this unit of Manulife Financial Corp., Toronto, found that, while 96% dreamed about having a comfortable retirement, only 24% felt they had set aside enough money to be on track for that. In fact, only 25% believed they had set aside enough to pay for their childrens college education.

In November, a study done by Harris Interactive for Transamerica Center for Retirement Services, Los Angeles, found that a disconnect exists between small business executives and their employees regarding retirement issues. For example, almost three-quarters of employers said they believe that employees prefer not to think about retirement until they near retirement age, but only three in 10 employees said that this was true of themselves.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 8, 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.