As insurance and financial services professionals entrusted with helping clients make wise decisions, it is imperative our industry understands the crucial segmentation of the so-called “senior” population. Age figures into a variety of legal and financial milestones; but more than divisions based on age, the truest insight into senior segments is cohorts organized around work, leisure, health, income and income sources. These filters provide windows into the needs and concerns of pre-retirees, silver entrepreneurs and retirees, as well as their spouses and family members.
Selling to seniors is not a one-note call to action. The concerns of a 70-year-old are not often the same concerns of a 50-year-old, yet both people are part of the senior market, along with a 90 year old. Clients are looking for multifaceted solutions that help them where they are today, and are flexible enough for tomorrow and the next day as well.
Let’s remember consumer needs from an emerging financial professional perspective. As I recall, going back to the 1970s, agents often offered a single-minded or one-note protection mindset: death and disability. As time moved on, our industry evolved into offering clients various kinds of protection and accumulation strategies and tactics. Financial professionals learned to help clients save more effectively and protect their families and assets via multiple products.
Now, our industry is in a completely new phase facilitated by holistic interaction with clients regarding protection and the need to help ensure sufficient income in retirement. As financial professionals, we have the potential to best serve clients when we become very well educated in who we are serving, as well as the different tools and new product features we can leverage for the protection of assets people have accumulated and still are accumulating during working senior years.
Senior Segment One: pre-retirees
While “senior” might typically start at 55 years of age and up, many people turning 50 need help making plans for what previously seemed so far away. Additionally, a younger spouse (for example, ages 45-54) married to an older retiree often is ready to make financial changes and pre-retirement decisions. The pre-retiree segment also has an elastic maximum age, since some people either choose to work — or need to work — into their 70s and beyond.
Whatever their ages, pre-retirees are still actively earning and accumulating. While they certainly should consider innovative solutions for the breadth of retirement (discussed on the following pages) some younger pre-retirees might consider term life insurance. As you know, term life is popular early in life, when clients are trying to protect a multitude of priorities. Later though, term life products can address specific, unique challenges relative to retirement, as some clients’ working lives extend from 55 to 65 and beyond. While a permanent life insurance solution alone may not be appropriate due to budget or other considerations, a strategy using a combination of term life coverage and a permanent life policy could be just what is needed.
As a hypothetical example, let’s look at the need to insure $1 million for a pre-retiree client. Understanding any ideas discussed are purely conjectural, perhaps we might divide the coverage equally – 50 percent each – into what some call the “term and perm” combination, where needs are both covered and more affordable. Leveraging policy features along the way, as clients transition through senior market segments, may be the optimal solution. Term insurance by definition is for a specific term, not forever, and can be a very cost-effective means for protecting income streams as Americans work longer.
Senior Segment Two: underfunded yet still working
As with pre-retirees, this segment encompasses diverse age groups within the senior population. The U.S. National Retirement Risk Index (NRRI) warns that more than half of today’s households will not have enough retirement income to maintain a pre-retirement standard of living, even if the wage-earners work to age 65. Raising an even more urgent warning, a recent Employee Benefit Research Institute survey of workers age 55 and older indicates almost 60 percent have saved less than $100,000 for retirement, and 24 percent have saved less than $1,000 for retirement.
Many people will need to consider working longer than anticipated. If a client is not in optimal condition to retire, he or she can choose to take advantage of “catch-up provisions” in 401(k) plans, and – as income continues longer and beneficiary spouses are exposed – consider the benefits of life insurance to protect loved ones for longer periods of time. The good news is innovations in life insurance can do more than simply pay for a catastrophic death. Some new products feature a suite of riders that not only allow accelerated access to a portion of the death benefit, but also offer the potential for clients to leverage cash value in the policy to access a stream of income, if needed, due to longevity or critical illness.
Senior Segment Three: actively retiring
When we consider it is now quite possible to work for 30 years, and then retire for 30 years, the challenge of how to appropriately handle distribution of assets during longer retirement years comes into even sharper focus.
Some of us never truly retire into the classic mythology of endless golf rounds and bridge games. Whether we ever fully retire or not, Americans described in this third senior segment are reaching retirement milestones delineated by legal thresholds.