Despite a recovering housing market and recent record highs in the S&P 500, market volatility and lingering fears from the 2008 financial crisis seem to be pushing many retirement-minded workers towards historically high investments in guaranteed income products. In fact, 78 percent of workers now prefer guaranteed products to those with higher growth potential and the possibility of loss, according to a recent poll by Allianz.
Likewise, only 28 percent of respondents said they are “comfortable with current market conditions,” and 80 percent cited fear of market uncertainty as the main reason for their preference for guaranteed sources of income. When asked how they would invest extra money for retirement, only 11 percent said they would put the cash towards a product with “high growth potential and no protection from loss.”
Aside from market volatility, the end-of-career transition from wealth accumulation to cautious spending and saving could be a cause. “I believe we’re seeing a change in mindset,” said Danny Brock of Brock Financial Consultants. “People looking at retirement have gone through their accumulation years when they took greater risks, and now they’re realizing they’re not going to have that same income. They can’t rely on as many volatile assets.” At a time when people are living longer than ever, pensions have gone by the wayside, and workers are still expecting to retire before 70, building a reliable nest egg is more important than ever.
Still, heightened fears of running out of retirement assets aren’t necessarily spurring strategy changes among seasoned advisors. “We haven’t changed out method of asset allocation, but we’ve certainly taken a more deliberate approach to helping people through retirement income planning,” said James Nichols, Head of Retirement Income and Advice Strategy at Voya Financial.