The largest, wealthiest, and perhaps most influential body of Americans are currently retiring, and they are doing so in droves. The baby boomer generation, traditionally defined as those who were born between 1946 and 1964, make up the largest portion of working Americans. They have influenced everything from the hula hoop to home ownership, and they control approximately 80 percent of the world’s wealth. In short, when they speak, people listen. This phenomenon is why baby boomers have the unique ability to influence the insurance industry in ways never before seen. According to the Social Security Administration, 10,000 baby boomers a day are becoming eligible for Social Security and Medicare benefits; this is a staggering number and one that is likely to remain that way for the next 16 years or more.
Part One: Annuities go with the flow
In 2011 the Associated Press took a survey of baby boomers: half of them are delaying retirement and a staggering 60 percent lost value in their investments during the 2008 financial crisis. Baby boomers have had to endure a dot-com bubble, a housing crisis, a war on terrorism, and the financial crisis of 2008and that was just in the last decade. The financial turmoil brought about from the “lost decade” of investing will never be fully recognized. While we as advisors will never be able to accurately forecast stock market corrections or pullbacks, we can prepare our clients for the next 2008 by utilizing alternative investments. Perhaps we should shift our strategy for those baby boomer clients away from rate of returns and toward lifetime income guarantees; after all, baby boomers have spoken and a staggering 61 percent fear outliving their money in retirement over death.
The best fit
If baby boomers want lifetime income guarantees and a stable, predictable retirement standard of living, then annuities are unquestionably the answer. Now I am not advocating that the annuity is right for everyone, but for those seeking guarantees in the golden years annuities tend to be the best fit. No stock, bond, mutual fund, CD, or other investment in the world can offer clients guaranteed income for life. As advisors, one of our many roles is to ensure that when clients retire they can stay retired and not worry about running out money. Most variable annuities once offered livings benefit riders; however, after the 2008 financial crisis many insurance companies went running for the hills, slashing rider benefits, and in some cases shelving products all together.