Will You Outlive Your Savings?

We know from research conducted in 2009 that retirees were using their advisors primarily to help them manage assets. Only 34 percent were going to their advisors for help with retirement planning. But that is changing.

In a just released LIMRA survey, three-quarters of advisors said they were spending more time on retirement planning than they did two years ago. And 9 in 10 are making changes to their business in anticipation that the demand for retirement planning will continue to grow.

Currently, only a quarter of all pre-retirees have a written retirement plan – even for those consumers who work with an advisor, only a third have a written retirement plan.  Yet, 6 in 10 advisors say these formal written plans are well received by their clients and 8 in 10 say it helps them better understand their clients’ goals and come up with product solutions.

It’s clear that consumers – now more than ever – need help not just managing their assets but creating a comprehensive retirement plan, which addresses the risks retirees face that could severely undermine their financial security.

How does life insurance play a role in mitigating longevity risk?

The old myth that you don’t need life insurance when you retire is no longer true.

Because people are entering retirement with less than a full tank (i.e., not enough saved) and people are living longer into retirement, there will be a need for the infusion of cash at the first death to make sure the spouse can make it through retirement.

In addition, we know that many more retirees are entering retirement with debt – nearly a quarter of retirees owe more than $50,000. 

We have always talked about buying life insurance is an act of love – providing financial security to the ones you love.  Doesn’t it make sense to provide the same security to your spouse in retirement?

The IMF just released a report warning countries about the risk of underestimating the longevity of their populations.  What are the implications of this report?

It supports what our industry has said all along — governments need to pass legislation that provides incentives to their citizens to systematically save throughout their lifetimes because it is clear that governments cannot afford to fund the retirements of their citizens.

Instituting defined contribution plans alone cannot do the job.  While these programs have encouraged millions of Americans to save, our research shows that people are inherently inert.  They need help and motivation to save systematically.

Without prompting, consumers are less likely to enroll in their retirement savings programs and many will not raise their contribution levels.  Our research has demonstrated that auto-enrollment and auto-escalation are not only effective but welcome by many workers to help them save for retirement.

Our research shows that the existence of an employer matching contribution is the single most significant factor in determining whether employees contribute to a 401K  plan or not. In fact, the presence of an employer match nearly triples the odds of employees contributing to their DC plan, according to our research.

As a society, we need to look at what else the government could do to help encourage people to save systematically through annuities or other long-term savings plans.