According to LIMRA LOMA Secure Retirement Institute research, approximately 66 million Americans are heading into retirement. By 2025, the number of retirees in the U.S. will explode, growing an astronomical 40 percent. This growth presents an unprecedented opportunity for advisors and brokers, as the last of the baby boomers and Gen X designate more than $25 trillion in financial assets for retirement income. This is roughly double the amount today.
Jafor Iqbal, assistant vice president of the Secure Retirement Institute and author of “The Retirement Income Reference Book 2015,” identifies three significant opportunities in the retirement income market for the industry in general and advisors in particular.
The first opportunity is in guaranteed lifetime income solutions. According to the LIMRA research, more than 40 percent of people approaching retirement are interested in converting at least some of their assets into a product that will give them an income stream for life. The market for converting these pre-retiree assets into future guaranteed income is an estimated $575 billion. The research found that there are also considerable numbers of current retirees looking for a guaranteed income stream, which represents another $180 billion. Combining the two, the total market potential for guaranteed lifetime income solutions is potentially about $750 billion.
The second opportunity is in the rollover market. The current size of the rollover market is an estimated $455 billion, but LIMRA research projects this will grow to $550 billion by 2018. About a quarter of individuals say they are strongly motivated to roll money out of defined contribution plans if they discuss the matter with an advisor before they retire.
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The proposed Department of Labor (DOL) fiduciary regulations may have a big effect on these rollover discussions and the market’s potential in the future. According to a report from management consultant Oliver Wyman entitled Distribution Disruption, the DOL’s “latest proposal to expand the definition of a fiduciary under the Employee Retirement Income Security Act (ERISA), if adopted substantially in its current form, will cause significant disruption to the advice landscape surrounding 401K rollovers and IRAs and will have substantial knock-on effects for retail insurance distribution channels generally.”