Retirement income is becoming an increasingly important topic within the financial services community as baby boomers comprehend the shift from accumulation of assets to distribution that happens once retirement starts. This is especially true for “transition boomers,” those 55 to 65 that are closing in on retirement or those just beginning a new life without the familiarity of a regular paycheck from their employer.
Often the topic of retirement income is not discussed with clients until retirement is officially underway. Many Americans look to their financial professionals to help them build a large nest egg for retirement, rather than secure a stream of income. Delaying the retirement income conversation until retirement begins can potentially limit the opportunity to build a level of certainty into their retirement portfolio and help reduce the risk of volatility brought about by unpredictable market performance.
So the key question is, are you doing enough to educate transition boomer clients about strategies that can help them achieve their financial goals?
According to the 2013 Transition Boomers and Retirement Income survey – conducted with more than 1,400 respondents between the ages of 55 and 65 – from Allianz Life Insurance Company of North America (Allianz Life), it’s clear that transition boomers need more help. But it’s also apparent that those boomers working with a financial professional have a much better understanding of the need for retirement income and strategies they can use to ensure they don’t outlive their money.
Help from a financial professional makes an impact
When asked about their most important remaining financial objective to address before retirement starts, the top selection among transition boomers was to “increase their savings rate” (29 percent). However, the results were much different based on whether or not the respondent was currently working with a financial professional. More than a third (34 percent) of transition boomers that did not work with a financial professional said they still need to save more money for retirement while only 14 percent of those that work with one indicated building their savings was still a top priority.
This extends to their response about the financial habits they believed would have the greatest negative effect on their lifestyle in retirement. Overall, more than half (57 percent) of transition boomer respondents said that either “not saving any money” or “saving some money, but not as much as I could” where their main financial bad habits. This response dropped to only 37 percent among those working with a financial professional, but increased to 63 percent for those not working with a financial professional.
Conversely, transition boomers that work with a financial professional have a much better understanding about the importance of having a withdrawal strategy that ensures they won’t outlive their income. Twice as many of this group (22 percent) noted their interest in developing a withdrawal strategy before the start of retirement versus only 11 percent of transition boomers that are going it alone without guidance from a financial professional.