Opportunity’s Knocking

National Underwriter Life & Health editor-in-chief Bill Coffin recently discussed findings from a Towers Watson survey that found that more than half of workers would be willing to sacrifice some take-home pay in exchange for more retirement benefits. This should be seen as a tremendous opportunity for advisors, who can help individuals realize that they have the ability to create their own retirement “benefits” by dedicating a portion of their pay toward mailbox money. That is—by utilizing a lifetime income strategy as part of their retirement plan. 

Additional research by the Insured Retirement Institute (IRI) shows that more than half of Americans have not discussed their retirement needs with a financial advisor. Again, this should be seen an opportunity. After all, IRI also found that 90 percent of boomers who worked with financial advisors believe that they are doing a good job of preparing for retirement. In simplest terms, these research studies tell a compelling story: workers want and value security, many have not discussed their needs with an advisor, but those that have are feeling good about it. Opportunity’s knocking. The next step is to identify the demographic segments where these opportunities are surfacing and to understand the issues facing each group.

Boomers

IRI defines the boomer generation as the estimated 79 million individuals born between 1946 and 1964. The early boomers have already reached retirement age, but the recent recession appears to have had a noticeable effect on their perception of retirement savings and income. During the recession, nearly a third stopped contributing to a 401(k) plan or another retirement account, nearly a quarter postponed their plans to retire, and 20 percent prematurely withdrew funds from a retirement account or another savings vehicle. This so-called “leakage” of retirement assets is particularly disconcerting since it will leave them with fewer assets for retirement. It should be no surprise then that more than 40 percent of boomers view Social Security as a major source of retirement income. Likewise, it should not be a surprise that this generation, having weathered the storm of the financial crisis and recent recession so close to retirement age, appears to be increasingly risk averse. Yet, boomers who own annuities have a higher level of confidence in retirement expectation, with nine out of 10 believing they are doing a good job preparing financially for retirement. 

Generation X

IRI defines this market segment as the 70 million Americans born between 1965 and 1981. This group tends to be well educated, work in professional occupations, and has a large portion of homeowners—particularly among married couples. But only about a third of them have ever consulted a financial advisor and just 41 percent have tried to determine how much they will need to save for retirement. Moreover, 45 percent of GenXers assess their knowledge of investing as low to none. At the same time, according to the Employee Benefits Research Institute, only 15 percent of this generation will be covered by a defined benefit pension. An IRI research report found that more than half of GenXers expect their 401(k) plans to provide a major source of retirement income. But among those who have saved, half of them have amassed less than $100,000. Considering such savings levels, it explains why only a third are confident of having enough money to live comfortably during retirement, cover their medical expenses and pay for their children’s higher education.