Photo credit: <a href="http://www.freedigitalphotos.net/images/view_photog.php?photogid=1499">Ambro</a>

Last summer, SunAmerica Financial Group embarked on a lofty ambition: to delve deep into the American psyche to better understand Americans’ expectations around the purpose, timing and funding of retirement.  The result:  The SunAmerica Retirement Re-Set Study.  The Study provides our industry with new, important, current insights about today’s investors.

The SunAmerica Retirement Re-Set Study was the second major study we’ve completed looking at attitudes about retirement.  The first was exactly a decade ago. 

This time around, we found a significant shift in attitudes and actions.  We’ve seen a retirement mindset re-set: 54% view retirement as a new chapter in life rather than a winding down—a significant increase over the 38% that held a similar view in 2001.

Retirement Re-Set

People have re-set the timing and purpose of retirement: retirement is being postponed by five years—from 64 to 69—triggered in part by increasing longevity as well as the recession and financial need.  And retirement no longer means the end of work: almost two-thirds say they would ideally like to remain productive and include work in retirement.

Nearly half of Americans 55 and older expect to provide intergenerational support for family members and, in a new twist on childcare, 70% of those believe their adult children will need financial assistance.

People are living longer and have smaller pensions or none at all.  They are woefully under-saved and increasingly concerned about the financial health of the Social Security and Medicare programs provided by the U.S. government.  And, of course, the debate that’s been raging in Washington has done nothing to alleviate their concerns. As responsibility for managing retirement savings shifts from corporations and governments to individuals, more than ever, Americans need professional guidance to achieve their protection, savings, investment and retirement income needs. 

More adults 55 and older today have used professional financial advisors to assist with retirement planning than 10 years ago (49% versus 40%).  And those who have used financial advisors are 72% more likely to feel very financially prepared for retirement. Today, the qualified retirement savings market is a $16 trillion market and is expected to grow to $20 trillion by 2015.  And with this new retirement mind-set, people have re-prioritized what’s most important in their investments.

Achieving financial peace of mind has replaced wealth accumulation as today’s primary financial goal.  People are now six times more likely to say their top financial goal is “saving enough to have financial peace of mind” (82%) versus “accumulating as much wealth as possible” (13%). 

Consumers can no longer rely solely on company pensions and Social Security to provide the financial peace of mind they need in retirement.  Real financial peace of mind comes from taking action and putting a plan in place – which they control – that is designed to both protect their family’s future and puts them on a systematic path to saving for retirement.

Nearly all (96%) say it is important to protect themselves, as well as younger and older family members from financial uncertainty.  Protecting assets is now five times more important than higher-risk returns.  Almost two-thirds (65%) now want investments that are guaranteed not to lose value. And 60% seek to protect their income from market loss and guarantee it for life. 

Living a long life, once relegated to a lucky few, is increasingly the norm.  The number of people who have celebrated their 100th birthday has more than doubled in just the last ten years.  Two-thirds of the survey’s respondents say their goal is to live to 100.

In addition to worries about serious health problems or becoming a burden on their family, almost half of the respondents were worried about running out of money to live comfortably.

Variable Annuities: Designed to Address the Needs of Today’s Retirees

Variable annuities have evolved to help investors address their critical retirement income needs, including the need for lifetime income. Combining the benefits of professional money management, the opportunity for tax-deferral, family protection and estate protection, variable annuities have long been used as an investment for accumulating retirement assets.

As demographics have shifted and investor needs have changed, variable annuities have added options to effectively distribute retirement assets as well. The advent of innovative new “living benefit” options, which include lifetime withdrawal benefits (known as guaranteed minimum withdrawal benefits or “GMWBs”), could well make variable annuities the financial strategy for millions of income-seeking Boomers.

A variable annuity with a withdrawal benefit can play an important role in a client’s portfolio of retirement investments.  A variable annuity with a lifetime withdrawal benefit can help investors address three key income planning priorities:   

1. Maintain their current lifestyle. To help retirees keep up with rising costs, many of the latest withdrawal benefits offer guaranteed annual increases for retirement income—even after withdrawals begin and even when the market goes down. These guaranteed increases for income, which can be as high as 7% annually and may be offered for up to 15 years, can help ensure rising retirement income even if the market is weak, flat or down. What’s more, in rising markets, many of these same benefits offer the advantage of “locking in” investment gains, if greater than the guaranteed increase.

2.   Participate in market gains while reducing risk. A variable annuity with a withdrawal benefit offers clients a way to invest for long term growth potential in stock and bond portfolios with the assurance that no matter how the market performs, their retirement income won’t go down due to market volatility.

3.   Ensure they’ll never outlive their money with income that lasts for as long as they live. Many of today’s lifetime withdrawal benefits offer clients a choice of “Single Life” or “Joint Life” options that ensure retirement income that’s guaranteed to last for the life of an individual or for the lives of both spouses. 

Of course, to realize the benefits of a variable annuity with a lifetime withdrawal benefit, clients will need to take withdrawals within the feature’s parameters. Withdrawal benefits provide a guarantee of a series of withdrawals, not a guarantee of principal, account value, or death benefit. Additional fees, investment requirements, age restrictions, and other limitations apply.

Depending upon market performance, clients may never need to rely on the protection provided by these optional insurance features. However, they may provide just the level of comfort that investors need to move off the sidelines—or stay invested—during periods of market volatility. Guarantees are backed by the claims-paying ability of the issuing insurance company.

Now, more than ever, Americans are turning to advisors for professional financial advice and investors are seeking the benefits that variable annuities offer.  Take a moment to review the findings from the SunAmerica Retirement Re-Set Study at www.retirementreset.com.  The results can help you better understand your clients and help you open the door to new prospects.

Steve Maginn is the chief distribution officer for SunAmerica Retirement Markets and SunAmerica Asset Management. These companies are part of SunAmerica Financial Group, Woodland Hills, Calif.