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Retirement Planning > Retirement Investing

Boomers Retiring + Smart Advisors = Big Business

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The majority of advisors, 94%, say offering retirement income planning services to clients will provide the biggest boost to their businesses over the next five years, according to a recent study by Fidelity Investments, with nearly 29% of those advisors polled expecting their business to double.

As the first wave of 76 million baby boomers approaches retirement within the next 10 years, advisors are helping these clients shift from asset accumulation to distribution, the Fidelity study says.

Advisors responding to Fidelity’s study said longer life spans and rising health care costs pose the greatest risk to depleting clients’ retirement income, so the majority of advisors (74%) recommend growth-generating investments like equity mutual funds and variable deferred annuities (61%). Advisors are also recommending other income-generating investments like fixed-income mutual funds, life insurance, and annuities, the study found.

Indeed, according to a recent study by Spectrem Group on the growing need for income-producing investments in retirement, the study says the challenge for affluent retirees is twofold: retirement plans are providing less income and people are living longer. Since the number of defined benefit plans has dwindled, most retirees are not receiving a monthly income stream for life. Nearly 40% of the affluent market is not covered by a DB plan, the Spectrem study found. Instead, they are receiving lump-sum payments from defined contribution plans, mainly 401(k)s. While the average balance in a 401(k) plan is high, the Spectrem study declares that nonetheless, “they are clearly insufficient to maintain the current standard of living for these households over an extended period of time.”

More than two thirds of the affluent individuals polled for Spectrem’s study also said that establishing an income stream with a guaranteed amount is an important goal. But the study found that only slightly more than half of the individuals polled have completed an assessment of how long their assets will last in retirement. The most common vehicles for providing an ongoing income stream are pension payments from an employer-sponsored retirement plan, guaranteed returns from investments like CDs, bonds, and annuities, and real estate that produces rental income. Of the 48% of the affluent households that said they created an income stream for retirement, 43% were unable to describe the type of investment that produces the income, the study found.

When affluent individuals were asked what types of financial services or products that they would like to explore as they reach retirement or may have already used, they noted the importance of estate planning and financial planning.–Melanie Waddell


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