Exactly how are boomers planning on getting ahead of the retirement boom?
To date, boomers have the highest median household income in the United States. They also make up the lion’s share of the political, cultural, industrial and academic leadership class. Boomers are choosing to have jobs as part of their retirement years. Some will work after retirement for extra money to stretch what pension they do have.
Some of these consumers have misconceptions of retirement risks that can cause a significant impediment to their development of a coherent financial plan to manage those risks.
Insurance professionals on the nonsecurities side of the business are recommending that “more mature” clients consider moving money away from risktype investments into something more conservative, and perhaps consolidating their atypical savings methods into – what? This has been the dilemma.
What can we offer that’s safe from market downs but can satisfy the new, up-and-coming retiree’s dilemma? Single-premium immediate annuities have been used creatively as a guaranteed income vehicle, but also carry an inherent problem of no client control of money. An immediate annuity may not keep pace with inflation as well as a diversified portfolio of a mix of bonds and stocks but the tradeoff is guarantees.
We are at the beginning of a significant demand from boomers for insurance products that move out of the traditional model.
A few carriers really do get it. This new direction in annuities is a consumerdriven concept for boomers. This concept is simply facilitating an income stream, a cash-flow feature, without having to surrender control of the money.
Traditional fixed annuities are a wonderful invention, and so are the fixed equity-indexed genre, but today’s buyer demands more from these products.
We now see new hybrids entering the marketplace- some with a traditional fixed design, and some with a fixed equity-indexed engine driving performance. These new hybrids offer the policyholder control and more access to their money by including an optional feature allowing the policyholder to generate a significant income stream while the remaining asset still participates in growth earnings.
Insurance carriers that want to stay competitive will have to rethink their standard plan designs and move toward developing boomer-friendly products.
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