Retirement is the hot topic today, largely because of the oncoming wave of boomers nearing the age where they will “hang it up.” To me it hardly seems possible that many of them are approaching retirement age–it was only yesterday that, while serving on our local school board, we were building new schools to educate this same bunch. Time really does fly, and as a current retiree, I can attest that it flies even faster in retirement–seems like every other day is Friday.
Perhaps a few observations might be in order from one who has been essentially retired for 15 years and who can also look back on a long-time affiliation with the marketing of insurance products. Much of what is being written on the subject today is speculation about what is best depending upon a variety of scenarios. I will limit my own observations to what has happened rather than speculate about the future.
At the outset I would like to state that my experience in the field and otherwise is that people facing retirement are a lot more attracted to guarantees than is generally supposed. I could point to many examples of this, but one in particular comes to mind.
For a number of years my partner and I were consultants to the profit-sharing plan of a local bank. It was the most successful plan in our area and often pointed to as a great way to help employees plan for retirement. From time to time we were asked to present annuity options to retiring employees. We always presented both variable and fixed annuities–all that was available at the time.
Out of all the presentations we made, only one selected a variable annuity, all others opted for the guarantees of a fixed annuity. The one selecting the variable–I will call her Betty–was a long-time cafeteria worker who had accumulated a significant sum in her profit-sharing account. The application was completed and submitted to the insurance company with the cash. The next morning Betty showed up in my office bleary-eyed and obviously in a nervous state. She said she had not slept a wink worrying about her decision to select variable income. She asked for her money back so she could restore her piece of mind. We were able to get her money back and Betty was happy again.
Another aspect of this case is also interesting. A few months later the head of the bank’s trust department retired, I will call him Ben. He was one of the bank’s most valuable employees and had built their trust department to the best in our state. And yet, when he retired his account in the profit-sharing plan, it was less than half that of Betty’s.