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Guaranteed Products Keep Investors in the Stock Market

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Those who invest in products with guarantees are more likely to stay invested in the stock market, even during short-term losses, a survey released Wednesday by Prudential found.

Investors' Retirement ConcernsAccording to the survey, which questioned Americans in the “red zone,” or the years immediately before or after retirement, 84% of investors would stay in the stock market despite short-term losses and 76% would stay for the longer term horizon, up from 74% and 72%, respectively, in 2006.

Investors have grown increasingly worried about investing for retirement over the past five years, the survey found. Almost 60% are worried about how much they’ll need to have saved, and 56% aren’t sure whether their retirement strategy is right for their needs.

Nearly three-quarters of investors are concerned about a “significant decline” in the stock market near their retirement, and 47% are hesitant to invest regardless of future opportunities for growth. Furthermore, most feel that the greater risk is investing too aggressively rather than too cautiously, a dangerous outlook, according to Stephen Pelletier, president of Prudential Annuities.

“When investors take risk off the table by getting out of the stock market, they potentially increase the risk that they will not be able to generate the returns they need to achieve their retirement goals,” Pelletier said in a statement.

Fifty-two percent of investors said that having stable income in retirement is a leading concern, but guaranteed products appear to quiet some of investors’ concerns about risk. Three-quarters find guaranteed retirement income products appealing and 82% consider them a “valuable addition” to their retirement portfolios.

Advisors may find some resistance, though. While over two-thirds of investors rely on a financial professional, the number of DIY investors has grown to 32% from 23% in 2009. Half of investors say they aren’t comfortable relying on an advisor’s advice without doing their own homework first.

Maintaining lifestyle and making the right trade-offs between growth and protection were named as the most significant retirement income challenges regardless of age, assets or investment style, according to the survey. Almost three-quarters said they were confident they could meet retirement income challenges, but they may be overconfident. The survey found that while investors have ideas for drawing retirement income, most do not address the possibility of outliving their savings.