New Guaranteed Lifetime Income Study Highlights Annuities & Importance of Framing in Client Discussions

The 3rd Annual Guaranteed Lifetime Income Study conducted by RIIA® members Greenwald & Associates and CANNEX, highlights consumer concerns about investment returns and the challenges this creates for advisors discussing annuities with clients.  At the same time, it reveals demand for Guaranteed Lifetime Income products when framed in the context of supplementing Social Security to ensure sufficient income is available in retirement.

The study shows respondents were concerned about earning as much as possible on investments to meet their retirement goals.  This was a worry for 40% of respondents up from 27% in 2015.  And, those concerned about maintaining their standard of living in retirement rose to 34% up from 25%, according to the survey of 1,105 retirees and pre-retirees with more than $100,000 in household assets.  The survey was conducted in December 2016.

Underscoring the need for guaranteed income products, eight in 10 consumers think those over age 50 must have a strategy in place to protect against significant investment loss.  In addition, more than half said they would opt for an investment that offered a lower but certain return over a higher return with a greater possibility of loss. Only one in five reported themselves to be highly knowledgeable about what investments to buy to achieve their goals and protect from market downturns.

“The study reveals high levels of uncertainty, particularly among pre-retirees with lower savings levels, and a focus on maximizing returns in the low interest rate environment,” said study director Doug Kincaid of Greenwald & Associates, who shares further perspective on the Guaranteed Lifetime Income survey results on the Greenwald Research website.  “It shows that consumers recognize the value of guaranteed income and expect advisors to discuss income strategies with them.”

Nine out of 10 respondents believe financial advisors should be presenting multiple retirement income strategies, and around six in 10 say advisors have a responsibility to present guaranteed lifetime income products.

The cost of guaranteed lifetime income products and the perception that they can get better returns with other types of investments were highlighted as issues.  In the context of an investment portfolio, only a quarter strongly agreed that guaranteed lifetime income products could help diversify portfolios.

“The data shows when it comes to their investment portfolios, consumers are focused on risk assets including equities, but at the same time want to ensure that in retirement they will have the income they need to meet their needs,” said Gary Baker, President of CANNEX USA.  “The lack of familiarity about specific products underscores the importance of providing advisors and their clients’ options to meet both needs.”

Ownership of annuities was low among the respondents, but when these products were framed as strategies – such as using them in conjunction with Social Security to cover essential expenses – more than half saw the products as desirable. When advisors had discussed retirement income strategies, clients were three times as likely to purchase a product that guarantees lifetime income.

The study also found that women, those in poorer health, and those with between $250,000 and $500,000 in assets see the greatest value in products that offer guaranteed lifetime income.

Supporting materials for the 3rd Annual Guaranteed Lifetime Income Study are available here.

 

About Greenwald & Associates

Greenwald & Associates is a market research firm that has focused on research on retirement.  The firm has partnered with the Employee Benefit Research Institute since 1991 to conduct annual Retirement Confidence Surveys of Americans and has conducted the Risk and Process of Retirement Survey for the Society of Actuaries biennially since 2001.  Founded in 1985, Greenwald & Associates has conducted research for well over 100 of the nation’s largest financial services companies.   For more information on the firm, visit http://www.greenwaldresearch.com.

 

About CANNEX

CANNEX Financial Exchanges Ltd. supports the exchange of pricing information for annuity and bank products in North America.  The firm provides financial institutions with the ability to evaluate and compare various guarantees associated with retirement savings and retirement income products.  In the U.S., this includes the evaluation of annuity guarantees (Income Annuities, Variable Annuities, Indexed Annuities, and Fixed Rate Annuities) and consulting services supporting the optimization and allocation of retirement income portfolios.  For more information about CANNEX, visit www.cannex.com.

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