Advisors can (and should) help prepare clients for retirement by demystifying and debunking common myths.
In doing so, they can gain trust and better serve specific needs.
So, what are some ways advisors can dispel those that are most harmful?
The fourth edition of the Retirement Income Reference Book highlights 10 common myths of pre-retirees and retirees.
The updated book, released in late 2018, provides a comprehensive view of changing dynamics, as the huge migration of Americans and their assets continues into retirement.
Below, LIMRA tackles three of the most prevalent myths that can hamper the financial decision-making of 401k plan participants.
Myth #1: I’ll die before I am 90
Reality: Retirees, pre-retirees and advisors tend to underestimate longevity risk when planning for retirement. LIMRA data shows that one in four 65-year-old men with average health will live to age 93; a quarter of women the same age with average health will live to 96.
Underestimating longevity risk could pose a significant threat to retirees who use systematic withdrawals as there is a possibility of exhausting their financial resources at an older age. Purchasing a product that guarantees lifetime income reduces the risk retirees will outlive their savings or compromise their retirement lifestyle.
Reality: While there are many people who may want to keep working, retirement is not always a choice. LIMRA Secure Retirement data show that over half of retirees retired earlier than they planned.
The most common reason for early retirements was health problems, which are not always predictable; nearly one in five said this was the reason they retired earlier than planned.
Additionally, LIMRA SRI data show that more than 70% of non-retirees expect to work in retirement or transition slowly, but just 16% of retirees reported they work. Advisors need to prepare clients for the possibility of early retirement and the impact it can have on their savings and potential lifestyle.
Myth #3: Annuities are bad investments
Reality: There are many investors and advisors that may have a negative view about annuities. However, LIMRA SRI data shows that nearly 7 in 10 retirees who own an annuity are more confident their savings and investments will not run out if they live to age 90, compared with 57% of retirees who don’t own an annuity.
Nearly three-quarters of retirees who own an annuity also are confident they can live the retirement lifestyle they want. Advisors can show clients that income annuities can relieve retirees of the anxiety of managing their investments as they get older.
LIMRA Contest to Recognize Up-&-Comers in Retirement Market
Know someone under 40 who is killing it in the 401k market and could use a little recognition?
LIMRA also announced recently that it is now accepting nominations for its “Retirement Rising Stars” contest, which will recognize 10 talented professionals under 40 who support the retirement business of LIMRA’s member companies.
“Those who work in the retirement market have a passion for helping Americans achieve financial security in retirement. Today’s young leaders are working in an industry with changing demographics that often challenge their efforts,” said Alison Salka, senior vice president and director, LIMRA research. “Each year we are continually impressed with our Retirement Rising Star winners and we look forward to seeing what this year’s leaders are doing to advance their companies’ retirement business.”
LIMRA established the Rising Stars program in 2016 as part of its 100th Anniversary celebration. The contest was designed to recognize the industry’s best and brightest professionals under 40 who demonstrate excellence in each of the four categories (Distribution, Retirement, Technology and Marketing & Communications).
To select the winners, a panel of judges will rate each nomination on a scale of 1 to 5; the 10 nominations with the highest scores will be the winners. As part of the judging process, LIMRA is requiring each submission to include three detailed examples of why the candidate exemplifies a LIMRA Rising Star.
Home office employees of LIMRA member companies who are under 40 years old and have a role in the retirement sector are eligible for this contest. Prior Rising Star winners are ineligible. To nominate a leader, visit www.limra.com/RSNominate/.
“LIMRA is looking for up-and-coming leaders who are successfully and creatively making a difference in the retirement area,” said Salka. “If this describes someone you work with, I encourage you to nominate them.”
Deadline for nominations is April 9, 2019, at 5 pm EDT. To learn more about the program or view prior Rising Star winners, visit LIMRA’s Rising Stars Program