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Life Health > Annuities

The boomers are coming: Are you ready?

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Yes, the boomers are coming. In fact, they’re already here.

In preparing for our big boomer issue set for May, I’ve been talking to experts and compiling data about this key demographic. I spoke recently with Katie Libbe, vice president of Consumer Marketing and Solutions for Allianz Life to get a better handle on how advisors can learn more about boomer clients and prospects. Libbe had helped put together Allianz’ “Reclaiming the Future” study that polled some 3,200 Americans who fall into the boomer demographic.

That conversation revealed some pretty interesting findings. Following are highlights, but be on the lookout for additional boomer stories leading up to our May feature.

SMA: In the “Reclaiming the Future” study, I see the quote where you say that boomers seem to understand the role that guaranteed lifetime income can play in their retirement strategy… is that due to the fallout from the financial meltdown? Why do you believe they get it now? The stereotype has been that boomers are resilient and if they lose their fortune today they’ll make it back tomorrow.

Libbe: The following stats from the study lead us to believe boomers learned from the recent recession:

Americans believe there is a retirement crisis in the U.S. Ninety-two percent agree with that statement. Among those in their late 40s, that number rose to 97 percent. And all (100 percent) of the respondents with lower income levels (HH income of $30k-$45 k and investable assets under $50k) agreed.

Americans fear outliving their money more than they fear death. A surprising 61 percent of the respondents said they were more scared of outliving their assets than they were of dying. Among people aged 44-49, that number climbed to 77 percent. And a whopping 82 percent of those in their late 40s who had dependents were more afraid of outliving their money than they were of death.

The economic downturn was a big wake-up call for Americans. More than half (53 percent) reported that their net worth dropped significantly in a very short period. About 43 percent saw their home’s value drop. Almost as many (41 percent) realized that they were not as “in control” of their financial future as they’d thought.

Americans are changing their behaviors. More than half (52 percent) said they had cut back on entertainment and dining as result if the downturn. Almost half (47 percent) found ways to cut daily expenses. 11 percent told their kids to expect less financial support. And about 5 percent actually decided to move to a less expensive area.

Americans view retirement planning differently after the recession.
More than half (51 percent) came to realize that a comfortable retirement is not guaranteed. 46 percent decided that protecting the security of their assets was “much more important now.” And almost a third (30 percent) wanted to provide themselves with “a new level of certainty” about their financial future.

SMA: We don’t often associate boomers with safe products like annuities. What were their thoughts on the product?

Libbe: Regarding annuities there were positive and negatives to take from the study.

The positive:

Consumers ranked annuities second-highest in satisfaction among all financial instruments, beating out mutual funds at 38 percent, stocks at 36 percent, U.S. Savings Bonds at 35 percent, and CDs at 25 percent (Gold and precious metals came in first, with a satisfaction rating of 62 percent).

The study asked consumers to consider the features that would be most important to them, if they could build the ideal financial product. The most-selected feature was “the ability to create a stable, predictable standard of living throughout retirement.” In second and third place, respectively, was the “ability to provide a guaranteed income stream for life” and “guaranteed not to lose value.”

When asked to choose between high returns or guarantees, 69 percent of those surveyed said they’d prefer a product that was “guaranteed not to lose value,” while only 31 percent chose a product whose goal was “providing a high return.”

An over whelming 80 percent of the people surveyed preferred a product with 4 percent return and a guarantee against losing value over a product with 8 percent return and a vulnerability to market downturns.

The negative

Annuities are shrouded in misperceptions – The study showed that a surprising 54 percent of the respondents expressed distaste for the word “annuity” – even after describing an annuity-like product as their ideal financial vehicle.

25 percent of the respondents formed their opinion of annuities more than 20 years ago.

Another 28 percent of respondents said they formed their opinion between 10 and 20 years ago.

Of those respondents, 64 percent admit that they haven’t researched annuities in the years since.

Another 29 percent say they’ve considered annuities “once in a while,” and only 7 percent say they’ve kept up with new product developments.


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