How many women and Gen-Xers have calculated how much money they will need to retire? To what extent does working with a financial advisor increase individuals’ retirement confidence? What are the tax implications of boomers who are retiring later, saving more and planning better?
Answers to these questions, among many others, are forthcoming in the Insured Retirement Institute’s “IRI Fact Book 2014.” The 198-page report, an all-encompassing guide to information, trends and data in the retirement income space, explores the state of the industry, annuity product innovations, and solutions for generating immediate and future income needs.
The report also details consumer use and attitudes towards annuities, spotlights trends among baby boomers and generation X women, examines boomer expectations for retirement this year, and delves into the regulation and taxation of annuities.
The following is a sampling of key findings unveiled in the report.
Fact 1: Three-quarters (75 percent) of households that own fixed annuities claim balances of less than $100,000, while 68 percent of variable annuity owners report balances below $100,000.
For households with between $500,000 and $2 million in investable assets – the sweet spot for advisors serving the “mass affluent market,” more than a quarter have a fixed annuity balance of $1-$19,000 (28.1 percent) or $20,000-$49,000 ($24.4 percent)
Others with investable assets between $500,000 and $2 million have the following fixed annuity balances:
$50,000-$99,999: 8.7 percent of owners
$100,000-$299,999: 15.5 percent owners
$300,000-$499,999 3.2 percent of owners
$500,000-plus: 0 percent of owners
Fact 2: Nearly half of households (43 percent) cite guaranteed monthly income payments as the primary reason for purchasing an annuity.
This fact holds true, the report states, among investors with less than $2 million in investable assets. Investors owning investable assets between $2 million and $5 million place the greatest importance on potential account growth (41 percent). The wealthiest investors value insuring portions of their assets (39 percent).
Households with $2 million to 5 million in investable assets cite the following reasons for purchasing a variable annuity:
33.7 percent: To generate a guaranteed payment each month in retirement.
41.0 percent: To provide a potential for account growth.
35.5 percent: To receive tax-deferral on earnings in the annuity.
30.7 percent: To provide diversification by adding another type of investment to the portfolio.
32.2 percent: To protect assets by insuring a minimum value of payments from the account.
17.4 percent: To set aside assets for heirs.
16.7 percent: To exchange an old annuity for a new one.
5.6 percent: Not sure why I purchased an annuity.
Fact 3: The economy has had a detrimental effect on retirement savings and planning for many women.
The report indicates that few women are confident that they will have enough retirement savings or that they have done a good job preparing financially for retirement.
51 percent of Boomer women and 57 percent of Gen-X women have weak or no confidence that they will have enough money to live comfortably in retirement or are unsure.
Significant numbers of both Gen-X and Boomer women (69 percent and 46 percent, respectively) have not attempted to calculate how much they will need to retire.
Though expecting personal savings to be a significant source of retirement income, only half of Boomer women with savings have $200,000 or more in retirement savings. And only one-quarter of Gen-X women have $100,000 or more saved for retirement.
Fewer than half have worked with a financial advisor to plan for their retirement. Those who do seek an advisor report that retirement planning is a top reason.
Fact 4: Working with a financial advisor greatly increases retirement confidence.