Last week, large strides were taken to address the national retirement income crisis in America. A coalition of 24 major insurers and asset management firms have joined forces to launch a public information campaign in an effort to educate consumers and financial advisers about the role annuities can play in a retirement income plan.
“The Alliance for Lifetime Income believes the possibility of outliving hard-earned savings is a real threat to the financial and emotional well-being of Americans currently in or approaching retirement,” the alliance’s education adviser, Colin Devine, said in an Investment News article.
The overall goal of the campaign is to shift the national conversation away from building investment portfolios and towards creating income portfolios.
“Our survey shows even people who spend their whole lives growing their savings worry they will be unable to maintain their desired lifestyle in retirement,” Devine added. “The primary goal of this project is to educate people about the risks they face in retirement. It is not product-specific.”
According to the Alliance’s research, almost half of the baby boomers and GenX households (with investable assets of $75,000 to $1.99 million) are approaching retirement WITHOUT protected monthly income other than Social Security. On the contrary, 88% of households in the survey with pension or annuity income say they are confident that their retirement money will allow them to reach their lifestyle goals while protecting them from unexpected expenses or market losses.
In a separate study from Allianz Life Insurance Co, researchers found that Americans are becoming more comfortable with market volatility in the short term. However, market fluctuations so far this year have many looking into finding ways to protect their savings from such volatility.
The 2018 Allianz Market Perceptions Study was conducted in April and involved 803 adults with investable assets of $200,000 or more who have not retired yet. More than a third of participants admitted that recent market volatility is making them anxious, and 57% said they would be willing to give up potential gains for a product that protects a portion of their retirement savings. That figure is up from 48% in 2015.
The alliance’s multifaceted, multiyear educational campaign is focused on raising awareness among consumers and advisers for the need to include protected lifetime income solutions within a retirement plan. Such solutions, like annuities, can help mitigate the impact of the rising cost of living and health care, as well as market volatility and longer lifespans.
“Now is the time for the industry to help educate more Americans on the risk of outliving their money so they can enjoy their retirement lives,” Devine said. “Everyone is hard-wired for saving. The message is you should start retirement income planning, and the younger someone does that, the better.”
The campaign includes the education of reluctant financial advisers about the latest innovations in retirement income solutions.
“This is not your grandfather’s immediate annuity,” Mr. Devine stated. “These new products are flexible and offer riders, such as long-term care coverage, without committing clients’ assets irrevocably,” he said. “The compensation system has changed, too, with a host of new fee-based products to fit into an adviser’s business model.”
The campaign website will host a checklist for consumers to help guide a discussion about guaranteed monthly income with their financial advisers. The alliance also acknowledges that annuities are often criticized for being complicated, confusing and expensive which is why they have pledged to work to simplify the language used in the industry to help consumers and financial advisers to talk about these lifetime income solutions.
“No adviser wants to sell a product they can’t explain,” Devine added.
The members of the Alliance for Lifetime Income include: AIG, Allianz Life, Axa, Brighthouse Financial, Capital Group, Franklin Templeton, Global Atlantic, Goldman Sachs Asset Management, Invesco, Jackson National Life, JP Morgan, Lincoln Financial, Macquarie, Mass Mutual,, Milliman, Nationwide, Pacific Life, Protective, Prudential, State Farm, SSGA, TIAA, Transamerica and T. Rowe Price.
Written by Rachel Summit