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Family Matters: What Agents Need to Know About Retirement Planning and Family Structure

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Financial services representatives are well versed in the challenges faced by baby boomers as they plan for retirement: rising health care costs, the erosion of traditional safety nets, and an uncertain economic environment are just a few potential roadblocks to clients’ future financial security. These factors, combined with age, gender, income, and lifestyle, all play an integral role in how financial services representatives work with clients to plan for a confident and secure retirement.

However, some financial services representatives might be overlooking a critical factor in their clients’ financial security – the impact that family structure has on individuals’ outlook and plans for living in retirement.

The MetLife Mature Market Institute Family Matters Study recently uncovered how individuals from three common family structures approach retirement planning and the challenges that each group believes they face: single women, with or without children, who are widowed, divorced, or never married; blended families, consisting of two parents who have at least one child from a previous relationship; and traditional families, which include two parents and children from their current relationship.

The study found that individuals from each family structure are seeking retirement advice and planning assistance to address the unique situations they face. For financial services representatives, understanding how these dynamics impact client needs regarding advice and products can go a long way in marketing to clients.

Single women
Of the three family structures studied, single women report the most concerns about planning for retirement. According to the study, 65 percent do not have a good idea of how much money they will need to cover basic expenses once they retire, and only 15 percent report that they are following a solid retirement plan. Fewer than half own a 401(k) plan, and only 38 percent have a clear idea of what they hope to experience in retirement.

Because they don’t have the buffer of income from a spouse, single women are most likely to feel that they’re on their own when it comes to covering expenses, supporting children and other dependents, and socking away savings for retirement. However, because single women don’t have the cushion of another income, they’re perhaps most in need of advice and products that can help them secure income in retirement. Products such as long term care insurance, longevity insurance, disability insurance, and employer-sponsored defined contribution plans can be effectively targeted to women who are concerned about providing their own safety net in retirement.

Blended families
In today’s society, the term “family” applies to an ever-increasing variety of arrangements. As demographics shift, stepfamilies become more common, and steadily more Americans may find themselves in a “Brady Bunch” family scenario.

Because blended families often have a unique make-up – 43 percent of those surveyed have children from both partners’ prior relationships, and 1 in 4 respondents have children from both their current relationship and their own or their spouse’s previous relationship – these blended families are seeking guidance for their own particular situation. According to the Family Matters study, blended families believe planning for retirement is more complicated for them than it is for those in traditional family structures. The findings from the study also indicate that individuals in blended families may be sacrificing their own retirement savings by not contributing regularly to a retirement account – only 29 percent reported making consistent contributions to such an account.

Additionally, some blended families express concern over their former spouse’s ability to impact their or their children’s financial security. For example, one respondent mentioned, “I pay out a large portion of my income to spousal support and child support and my wife’s ex doesn’t pay his child support.”

Financial services representatives need to understand how financial obligations to an ex-spouse or the need to support a large, complex family affect how these individuals can plan and save for retirement. Many of their clients may also be unaware of the potential impact of remarriage on pension and benefits arrangements, estate beneficiary designations, and spousal Social Security benefits. Producers who fully understand clients’ family situations and their financial implications will be better equipped to provide the personalized guidance these consumers crave.

Traditional families
Of the three family groups that were surveyed, traditional families tend to have the most well-established expectations for retirement and be furthest along in the planning process. Nearly three-quarters (70 percent) of respondents in this category already have 401(k) plans or intend to in the next 12 months. The same is true for defined contribution plans (44 percent) and annuities (17 percent). More than half of traditional family respondents report having a clear idea of what they hope to experience and achieve in retirement, and 30 percent believe they have a good retirement plan and have stuck to it.

But while these traditional families reportedly feel more confident than their counterparts, they’re also seeking guidance from financial services representatives on the most effective ways to plan for a secure retirement. The Family Matters study found that some concerns transcend family structure – namely, creating a larger pool of savings and assets and covering healthcare costs in retirement. These items were of roughly equal concern to respondents across the three categories.

By considering their clients’ family structures, producers can position themselves to effectively serve the mounting demand for products and services to make the transition to retirement as smooth as possible, no matter the circumstances. Understanding the implications that family structure has on retirement planning will enable you to help clients and prospective clients alike to achieve the financial security they need and make the most of what they have in retirement.

John Miglaccio is director of research for the MetLife Mature Market Institute. He can be reached at [email protected].