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The Coming Groundswell

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I’m not sure it’s a groundswell yet, but I do detect a definite quickening (almost a rumble) in the amount of attention being focused by industry, government and media on what it’s going to take for today’s pre-retirees to deal with the perils of what will basically be a self-financed retirement. Now, if only consumers in large numbers would start to get the message!

Yes, Social Security will still be around (despite the dire predictions from D.C. we haven’t heard much of recently). And so will Medicare (although probably with a lot more restrictions than at present).

But the steady stream of income that used to come to retirees in the form of pensions? “Forget about it,” as we like to say in New York. (That’s formal for “fuggeddaboudit.”)

No, we seem to be marching in lockstep back to Hoover and the creed of “rugged individualism” that he espoused and which FDR put the snuff to. So, it’s 401(k)s, annuities and long term care insurance in terms of products that will make sure your nest is feathered in your golden years.

And it’s making sure whatever money you do have lasts longer than you do (or at least as long). Otherwise, it’s working at Wendy’s when you’re 82 and having a hell of a time telling the difference between a large and a small chili because you haven’t been able to afford new glasses for the last 12 years.

People are starting to think about how they’re going to live when they retire and they’re getting concerned. Even the affluent are getting concerned, as evidenced by the PNC Financial Services Group Inc., of Pittsburgh, about which we wrote in the Feb. 6 issue.

What the survey showed is that among those with investable assets between $500,000 and $999,999, just about half said they feared the insolvency of the Medicare system. Even for those with investable assets over $1 million, more than a third had this concern. Also, high on the radar screen in this survey was respondents’ fear of immediate family members potentially needing expensive medical treatment or long term care.

To paraphrase Shelley, if the affluent are nervous, can the middle class be far behind?

In the face of mounting trepidation over being able to afford retirement or maintaining one’s lifestyle after leaving the work force, it’s good to see that companies in the industry, trade groups and industry leaders are getting on message–and even more importantly, are touting the same message.

We’re seeing this in the increased attention being given to income planning by companies and advisors. But it’s also apparent in the growing acknowledgment that changes will have to be made to the industry’s current stable of products in order to make them more understandable and appealing to consumers.

The various guarantees in variable annuities that respond to consumers’ different risk tolerances and the interest in products that transition as life stage needs change are but two examples of what’s going on. So is the growing chorus of industry players singing the praises of simplicity.

Even government is getting in the act, with some creative ideas finding their way into (as yet unpassed) legislation.

As I said up top, it may not yet be a groundswell, but change is in the air. And change is good.

Steve Piontek