A recent study by an Allianz Group research team reveals how the recent economic turmoil and plunge in household wealth is affecting consumer habits.
The research showed that the spike in savings rates, which recently hit 6 percent, could prove to be a permanent shift in Americans’ behavior.
Such a sea change in consumer habits could correlate to an increase in the need for guaranteed and safe-savings solutions, as Americans become more leery of risky investments.
Allianz estimates that $700 billion in U.S. savings could be amassed in the next 10 years. This would come as a reaction to the unprecedented drop in net worth from mid-2007 to early 2009. At its worst, the collapsing real estate and stock markets erased almost $17.5 trillion in household wealth.
“We have witnessed a surge in the saving rate since early 2008, up to an average of 4.6% in 2009,” said Michael Heise, an economist at Allianz. “We anticipate that products such as mutual funds, annuities and equities will benefit from this change.”
After a slow start to 2009, purchases of financial assets are set to climb to an estimated $700-800 billion annually. This compares to the average of nearly $900 billion for the boom years of 2003 to 2007.
“One [lesson] from the financial crisis is that it’s not just about asset allocation, but asset location. There is a definite need for financial products that offer guaranteed lifetime income and which we view as the emerging fifth asset class,” said Allianz Life Insurance president Gary Bhojwani. “It goes beyond saving for retirement; it’s about planning how we want to live once we do retire.”