The most recent retirement market analysis from LIMRA Secure Retirement Institute predicts that over the next 10 to 20 years and beyond, there will be an unprecedented migration of people and assets moving into retirement.
By 2025, says LIMRA in The Retirement Income Reference Book 2015, a reference that provides insights on the retirement market and that addresses the various facets of both planning and managing retirement income, a whopping 66 million Americans will leave the workforce and retire. That number is even more significant when one realizes that within the next 10 years, the number of retirees in the U.S. will increase by 40 percent from the current figure of 48 million retirees.
The skyrocketing number of retirees, largely from the Baby Boomer generation, will shift a considerable $25 trillion in assets toward retirement income, roughly double the amount available today. In addition, investors aged 60 and older control nearly 60 percent of all financial assets in the U.S.
In a LIMRA podcast, “Explore Opportunities in the Retirement Income Market,” Jafor Igbal, assistant vice president of LIMRA Secure Retirement Institute and author of the reference book, discusses key research findings and identifies emerging trends. In the podcast, Igbal identifies three important opportunities in the retirement income market for the industry in general and advisors in particular:
1: Guaranteed lifetime income solutions: More than 40 percent of pre-retirees are interested in converting at least some of their assets to a product that will assure a lifetime stream of income. The market for converting pre-retiree assets into future guaranteed income is considerable, estimated to be $575 billion. And current retirees who are seeking guaranteed income add another $180 billion to that number.
2: Rollover market: According to the LIMRA research, the rollover market is estimated to be currently $455 billion, expected to grow to $550 billion by 2018. About one-quarter of retirees are strongly motivated to roll out money when discussing retirement income with an advisor prior to retirement. In the future, potential Department of Labor (DOL) regulations could significantly impact these rollover discussions.
3: Retirement income planning: LIMRA Secure Retirement Institute research consistently points to consumers’ concerns about having sufficient money after retirement. More than 40 percent of pre-retirees aren’t confident about their financial security after they leave the work force. Pre-retirees who work with an advisor are nearly twice as likely to have completed retirement planning activities like estimating how long their assets will last and setting a strategy to generate income in retirement.
The LIMRA volume reveals that there are four important disruptors challenging the industry right now: changing demographics, evolving technology, expanding regulations and an unprecedented migration of people and assets into retirement. The challenges will also represent valuable opportunities for companies that can respond to these dynamics.
Annuities can offer retirees and pre-retirees that much sought-after guaranteed income stream after retirement. Products like fixed income annuities (FIAs) can not only provide retirees with regular payouts, but can also assure the safety of the initial annuity principal.