Dive Into The Retirement Pool Now
If you are like many in the financial services industry, you think the retirement boom is still five or 10 years away. If it is, then you have time to prepare for it and can even put off preparing for it for some time, right?
It is easy to fall prey to this type of logic. The looming baby boom generation can lead one to think that there really is no meaningful market until the boomers retire.
Since the boomer generation spans 19 years (including all those who turned 39 this year), the number of retirees will grow somewhat gradually. While there is no reliable way to predict with certainty when boomers will retire, we can use the median retirement age of 60 from LIMRA research as a proxy for retirement age.
If we assume that all people retire at this age, then there will be more than 2.5 million new retirees this year and all years for the foreseeable future. The numbers jump to about 3.5 million when boomers begin to retire and exceed 4 million 14 years from now.
Combined, there are more than 47 million people between ages 55 and 75 today. Sounds like a large market to me.
This market has the potential to be extremely lucrative for those that make a concerted effort to tap it.
There are two major threats to this potential. First, if you wait too long, others will pick up market share you could have had. Second, other industries also are looking at this generation for their products and services.
There also is a growing body of evidence from LIMRA research suggesting that both current and future retirees could use your help.
For example, one in four people who retired between 1998 and 2001 with the option of receiving a lump sum distribution from a defined contribution (DC) and/or defined benefit (DB) plan at work felt they could have benefited from more retirement planning guidance.
In a recent survey of people aged 50 to 75 with at least $50,000 in investable financial assets, 78% of those not retired said they could do more to plan their retirements and an additional 16% werent sure, leaving just 6% who say theyve done enough. Two in five retirees feel they could do more planning, with an additional one in three saying “not sure.”
That same survey found that two in five retirees and three in five pre-retirees do not believe guaranteed lifetime income sources, such as social security and employer pensions, will be enough to cover their basic living expenses in retirement.
Of these, over one-third of the retirees and over half of the pre-retirees said they are interested in converting some of their assets to create guaranteed lifetime income to fill the gap. Not only do they recognize the need for planning guidance, but also they are willing to consider the key risk management strategies that the insurance industry offers.
Other than encouraging savings and providing products to do so, the financial services industry has done relatively little to help the millions retiring each year to maximize their chances of success.
New approaches, new tools and new products are called for.
New approaches. Since virtually all boomers still are not retired, helping them accumulate assets in preparation for retirement makes sense, especially since less than half of private-sector employees are covered by any type of pension plan (DB or DC). This accumulation mindset is beneficial when trying to help working-age Americans save for retirement.
However, the industry needs to think of new ways to approach the retirement phasethe time when people will need to rely on their accumulated savings.
Peddling more accumulation products with new bells and whistles to these people will not necessarily meet their needs. These needs include managing a growing list of risks they will face in retirement (e.g., health care related risks, longevity risk, inflation risk, investment risk, etc.). These are risks about which many people often are uninformed and for which they are inadequately prepared.