Eight in 10 working-age Americans are prepared to give up spending today to secure their financial future, but nearly four in ten believe they will run out of retirement savings, according to new research.
These are among the key findings of an ING U.S. "Retirement Income Redefined" survey, released during a July 23 webcast hosted by ING U.S. executives. The phone-based survey, conducted by ORC International in June, polled 850 men and women who are 30 years of age or older.
Nearly two-thirds of the survey respondents agree they would need $1 million to have a comfortable retirement, while an additional third peg the figure at $500,000 or less. But one-third of retirees polled say they're experiencing a lower standard of living in retirement than when they were working.
And 8 percent of pre-retirees anticipate having a reduced standard of living in retirement.
"We think these findings are telling," said webcast presenter David Bedard, president of ING U.S.' annuities business segment. "They demonstrate possible gaps between the perceptions and the reality that many people will have with their own retirement security."
To address the shortfall, he added, ING is betting that baby boomers and other younger generations will increasingly place their retirement savings in fixed indexed annuities, products that capture a portion of equity market gains while also (like traditional fixed annuities) offering downside protection against market slides.
The company's execs are not alone in this belief. In 2012, Bedard noted, sales of fixed indexed annuities totaled $34 billion—almost 2.5 times the level of 2003—riding an annual growth rate of 10 percent. Indexed annuities now account for 15 percent of all annuity sales, up from six percent just 10 years ago.
Underpinning the rise in consumer interest are new product launches, which grew to 49 last year from 24 in 2009. Bedard said that ING expects this number to rise in 2013.
"The focus of [planning conversations] has shifted from saving for retirement to finding way for retirees to generate an income stream they can't outlive," said Bedard. "The next wave of growth and innovation in this space will be around hybrid strategies and longevity income features."
Value of advisors
Rich Linton, ING U.S.'s president of individual retirement markets, observed during the webcast that working with a financial advisor greatly increases the odds that individuals will calculate their future retirement income stream based on current savings. Citing results from the Retirement Income Redefined study, he noted that 87 percent of those who work with an advisor have made this determination, in contrast to the 59 percent who haven't engaged one.
The study also finds that 70 percent of married/committed partners have discussed the need for guaranteed income with their spouses. Generally, men are more likely (74 percent) than women to have had the discussion.