Interest in income planning and long term care planning among working adults appears to be on the rise. The signs are incremental, but unmistakable.
What are those signs?
1) In the income planning arena, more working age adults are showing interest in retirement funding. For example, U.S. workers surveyed in 2007 by AXA Equitable Life Insurance Company, New York , came in first in terms of the importance they place on the financial situation of their retirement compared to workers in 10 other countries. They gave this aspect of life an 8.7 importance rating, compared with a world average of 8.1. The next most retirement-minded participants, the Italians, gave retirement financial situation an 8.6 rating. (See our article on this here )
2) Financial advisors are starting to align with this trend. For example, in this months’ feature article by Jim Connolly (How prepared are advisors to meet the income planning challenge?), Joshua Itzoe, a Towson, Md. certified financial planner, points out that that his firm starts on the front end with clients, talking with them far enough in advance to prepare them for the changes they will face in retirement. Meanwhile, 43% of readers responding to our December 2007 Income Planning poll said they think advisors are ready, in a limited fashion, to help clients make the change to receiving income from annuities once they retire.
3) The LTC industry reports increasing success in making LTC insurance sales to people younger than age 60. The industry had started trying to do this as early as the 2000s, but the numbers didn’t stack up that way until 2007. That’s when the American Association of Long Term Care Insurance, Westlake Village, Calif., reported, in November, that the average age of Americans buying individual LTC policies now appears to be 58. By comparison, the average age in 2000 was 67, says the association. (See our article on this here)
4) LTC carriers are reporting success at selling LTC insurance at the worksite. For example, the group LTC insurance business at Unum, Chattanooga, Tenn., added over 800 groups and 60,000 employees through the 3rd quarter 2007, according to John Noble, director of LTC. A major trend was in the growth of employer-funded base plans, where employers agree to fund a minimum level, such as a $2,000 monthly benefit for 2 years for professional home care, he told National Underwriter, adding that employees often choose to increase benefit levels at their own expense. (See our article on this here)
These and similar developments suggest that 2008 may turn out to the tipping point the retirement industry has been anticipating–the point where demand for income and LTC planning, and the related products, grows by noticeable percentages.
Such a change should help torpedo conventional thinking, which for many years has had a dampening effect on personal, governmental and industry efforts to gear up for the big boomer retirement wave.
As you may recall, conventional thinking has said that working-age adults are too far away from needing retirement income or LTC even to consider planning, let alone actually funding, for these two needs. Furthermore, conventional wisdom has said, for many years, that working-age adults, at least those under age 60, just can’t afford to make financial commitments in either area. This is due to the press of other life-journey expenses such as child-rearing, mortgage and home ownership, college education planning, assistance to aging parents, and health care–to say nothing of expenses for fun things like travel and entertainment. Finally, conventional wisdom has said that uncertainties in the economy, and certain problems with currently available income and LTC products/programs, have contributed to sluggish growth in these areas.
It is doubtful that those conventional wisdom concerns have gone away in a poof. But the signs listed above, and many others, suggest that concern may finally be giving way to desire to act. If you have any doubts, two more articles may help put things in perspective: Women more inclined than men to join retirement plans and Parents put retirement savings ahead of college savings. Should be an interesting year!