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Halloween Horrors

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I’ve spoken to a couple of industry groups in the last week or so (late October) and the topic turned out to be unintentionally appropriate for Halloween. What proved to be so scary was that a good part of my talks happened to be about how extraordinarily unprepared so many of the baby boomers are for retirement.

This, of course, is not exactly something from out of the great unknown. But somehow doing the research for the theme (and all of it was from the pages of National Underwriter), brought the predicament of this 77-million-strong cohort into almost unbearable focus.

Perhaps the scariest statistic out of all those I found came from the Employee Benefit Research Institute’s 16th Annual Retirement Confidence survey. This found that 31% of those aged 45 to 54 had accumulated less than $10,000 for their retirement. Of those over age 55, some 36% reported having less than $10,000 accumulated.

In case you just did a double take, I have to assure you that the 10-grand figure is not a misprint. Even in a place as rife with denial as Boomerland, you have to wonder if these people are giving any thought to how they’re going to live when they stop working. Or do they intend to stop working?

Many boomers, in fact, say they not only will but want to continue working past normal retirement age. But this may simply be making a virtue of out of (sheer) necessity.

Lest you think that this is an isolated statistic, here is another sobering analysis–this one done by the Center for Retirement Research at Boston College. The CRR developed a National Retirement Risk Index that measures the percentage of working-age households that are at risk of not being able to maintain their pre-retirement standard of living once they stop working.

While the formula that CRR came up with is complex, the results of their calculations are so striking they hit you right in the face. Defining an at-risk household as being one whose retirement income is likely to be more than 10% below the target income needed to maintain their pre-retirement standard of living, CRR found that 43% would be at risk of having inadequate retirement income. And this is even if they retired at age 65 and annuitized all their household wealth.

It looks as if a lot of people are going to be counting on Social Security to live on when they retire. The thought of fighting over the cat food with your grimalkin is not a comforting one.

In the face of statistics like these which show that many boomers have only a limited pot of money for retirement and other protection product needs, the thesis of my talks was that the insurance industry needs to stop thinking of itself as the “insurance” industry and instead start thinking of itself as the solutions business. I’m happy to say that this was my conclusion before I found out that the National Association for Variable Annuities had decided to henceforth call itself NAVA with the tagline “The association for insured retirement solutions.”

This is definitely the message that boomers need to hear over and over again.

Halloween, with its mock-scary fantasies, is a fun holiday–once a year. Unfortunately, too many boomers now are living day-to-day in some kind of fantasy world that is going to ensure there’s no escaping later on. The fun house is going to turn out to be anything but.

Steve Piontek



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