By Linda Koco
The financial marketplace is rearranging itself along demographic parameters–creating what may be called the “Retirement Industry” out of the whole cloth of the “Life and Financial Services Industry” that was the darling of the 1990s.
The sea change is everywhere, including your own financial shores. If it hasn’t splashed up on you, it will.
The key business of this industry is to offer concepts, products and solutions that support people living in retirement for 20, 30 or more years. Retirement income planning is a key component, as we have noted in this space many times. But so is planning for long term care, critical illness, business startups, late-in-life protection and investment needs, new living arrangements, and, yes, legacy/wealth transfer.
Familiar insurance concepts ride in the mix, as do securities and banking concepts, but the focus is still on creating a financial infrastructure for retirement living. This infrastructure is especially suited to people who retire with build-it-yourself assets like 401(k)s, IRAs, HSAs, Keoghs, self-paid health care and long term care plans, real estate, private savings and investments, and any other non-government-, non-company-supplied financial benefit/asset.
NU has covered the many sides of this trend for years, but now it seems the elements are functioning as an integrated whole, the Retirement Industry.
Ask the non-financial people in your community about this, and there is instant recognition. The police, the religious, the educational, the medical and LTC, the nonprofits–they all know about it and how the Retirement Industry impacts them. Even the sidewalk crews know–”these flat curbs make it easier for the retired folks to get around,” they say.
So it is that “retirement” is popping up throughout the financial supermarket.
For instance, in NU’s recent focus issue on life insurance–the mainstay of the Life and Financial Services industry, as you know–there was repeated mention of how life insurance fits into retirement planning. That’s by way of loans and withdrawals, acceleration riders, geriatric underwriting, no-lapse guarantees and more.
The “retirement-ward” shift shows up in the general media, too. Consider: MetLife Mature Market Institute found, in a 2003 report, that major media coverage on annuities increased by 30% overall from 2001 to 2003. That is a substantial change, given that, up to then, the general media had focused heavily on managing money, investing and wealth building but not on retirement income strategies.
It’s not all good news, though. MetLife notes that at least 74% of the 120 articles studied in 2003 had at least 1 or more errors, and 59% had a misstatement or incomplete information on income annuities. Even so, there were positives: The report found 88% of the articles did contain correctly reported basic facts about income annuities.
In the insurance arena, the Retirement Industry headwinds are a daily presence. Just recently, for instance:
o Lincoln Benefit Life said it will cease offering its branded LTC policies in October 2005. The reason is telling: The company says its focus is on “developing and offering retirement savings and life products,” and that LTC insurance is not in that product category. Still, Allstate Life, the firm’s Northbrook, Ill., parent, says many of its customers are nearing retirement, so the company also announced plans to offer LTC through another carrier.
o ING, Hartford, Conn., said over 1,000 advisors in 20 states now have attended its “income planning symposiums.” These gatherings address the social, demographic and financial aspects of retirement, including income strategies (now, later and never) and financial planning approaches.
o The Phoenix Companies, Farmington, Conn., said it now offers a guide for advisors and clients on how to choose an annuity that best suits retirement needs. Included are sections on asset allocation, dollar cost averaging, living benefits, death benefits, annuity product fees, etc.
o Prudential put out 2 new studies, both pointing to how LTC needs to be a key retirement planning consideration for today’s workers.
o MassMutual Financial Group, Springfield, Mass., said it acquired Golden Retirement Resources, Inc., a New York specialist in retirement income products and services.
This retirement focus is being reinforced by a continual flow of related research. Just this week, for example, we learned that: 34% of pre-retirees age 50-65 ranked not outliving assets as their most important concern (a study from The Hartford, Simsbury, Conn.); and 56% of seniors age 62-75 would have begun saving earlier in life if starting all over again (a study from Financial Freedom, Irvine, Calif.).
Even if older people take phased retirement or 2nd career retirement instead of traditional retirement, chances are they will still need the products and services of this sprawling, multi-disciplined Retirement Industry. The business seems as evergreen as money and the customer needs as ever-varied as life itself.
Even if older people take phased retirement or 2nd career retirement instead of traditional retirement, chances are they will still need the products and services of this sprawling, multi-disciplined Retirement Industry. The business seems as evergreen as money and the customer needs as ever-varied as life itself.”