Boomers With Advisors, Annuities Are More Retirement-Ready: IRI

While baby boomers remain unprepared as they head into retirement, with 42% of them having no retirement savings, 79% of boomers who work with a financial professional have at least $100,000 in retirement savings, according to a just-released report by the Insured Retirement Institute, in conjunction with National Retirement Planning Week.

According to the report, Boomer Expectations for Retirement 2018, among boomers who do have retirement savings, 38% have less than $100,000 saved for retirement, while only 38% have calculated the amount they will need to retire.

The report from the annuity trade group also trumpets annuity ownership as an indicator of retirement readiness, with 80% of annuity owners having at least $100,000 saved for retirement, compared with only 53% of non-owners.

About 26 million boomers have turned 65 since 2011, with another 50 million to follow in the next 10 years, IRI reports.

IRI’s internet-based survey polled 806 individuals broadly defined as members of the baby boomer generation — aged 55 to 71 — from March 13 to 16.

According to the survey, only 25% of boomers believe that they will have enough money in retirement, and only 28% believe they are doing (or did) a good job financially preparing for retirement.

Cathy Weatherford, IRI’s president and CEO — who plans to retire in December — said on a Monday morning call with reporters to announce the study’s findings that 46% of boomers “expect they will need $45,000 — in current dollars — or more in annual retirement income. Assuming the current average Social Security benefit of $16,848, an individual would need to generate at least $28,152 in additional annual income from a combination of pension benefits and retirement savings.”

At current rates, “a life annuity paying $28,152 in annual guaranteed lifetime income would cost approximately $430,000, far more than most boomers have saved.”

She urged those who haven’t “adequately prepared for a life without regular paychecks from employment” to “educate themselves, plan adequately, save as much as possible and consult financial professionals to create effective and realistic retirement strategies.”

Only one-third of boomers “believe they will be more financially secure than their parents,” added Tim Seifert, vice president and head of annuity sales at Lincoln Financial Group, on the call.

Seifert said that advisors must help clients address the longevity issue. Clients, he said, “come in with two questions: ‘Do I have enough/?’ for retirement? And, “’tell me that it’s going to last for my lifetime, which is a really long time.’”

For a 65-year-old couple, “there’s a 73% chance that one will be alive at age 90,” Seifert said.

What does that mean? “Advisors have to develop an income strategy that will last 30 to 35 years,” he said. “Their savings needs to last. Only 18% of Americans can depend on pensions for retirement income,” he added, with most being dependent on Social Security and drawing down portfolio holdings.

Other report findings include:

• Only 25% of baby boomers are confident their savings will last throughout retirement.
• Four in 10 boomers plan to withdraw from their 401(k) “as needed” to pay for their basic expenses, but only half as many (22%) consider their 401(k) to be a major source of retirement income.
• Seven in 10 boomers say it is very important for retirement income to be guaranteed for life, yet only 14% plan to purchase an annuity with a portion of their 401(k) or IRA and only 3% have done it.
• Eighty-four percent of boomers with financial advisors have had income from an annuity included in their financial plan by their advisor (43%), or their advisor has discussed using annuities for retirement income with them (41%).
• Monthly guaranteed income is the most important single trait boomers look for in a retirement investment, ranked No. 1 or 2 in importance by 41%.

— Check out Ibbotson: Can Fixed Indexed Annuities Beat Bonds in Retirement Portfolios? on ThinkAdvisor.