The number of Americans who believe their retirement savings and sources of income will not last them throughout their lifetime is on the rise, and only about a third of Americans believe they will be able to fund their “wants” in retirement.
According to the just-released third Protected Retirement Income and Planning Study from the Alliance for Lifetime Income and CANNEX, less than half of respondents (48%) believe their retirement savings and sources of income will last them throughout their lifetime—which is a significant 13% drop from a year ago.
Notably, among those who have an annuity, 74% believe their savings and sources of income will last their lifetime, compared to only 43% for those without an annuity. The research also found half of consumers are now more interested in protecting their retirement income since the start of the Covid pandemic.
The survey reveals a notable lack of financial preparation for the future. Despite mounting economic concerns, nearly one quarter of consumers don’t have any kind of financial plan and another quarter (28%) have an overall direction in mind, but no financial plan to get there.
Nearly half of non-retired consumers ages 45-75 are saving less than 10% of their annual income for retirement. Among those not yet retired and who are advised by a financial professional, only three out of 10 have both talked with their financial professional and have a plan in place in the event they retire early—something nearly a third of those not yet retired believe they will be forced to do for reasons beyond their control.
“Consumers’ strong desire for protection amid this tricky economic environment is why the Alliance is relentless in helping people understand how to protect their hard-earned savings,” said Jean Statler, CEO of the Alliance for Lifetime Income. “Not surprisingly, consumers are turning up the heat on their financial professionals and asking them to find ways to protect their portfolios. Unfortunately, the research also shows that many financial professionals are falling short of what their clients expect and want.”
Just over half of consumers that work with a financial professional would give him or her an “A” for how much they listen and understand needs, according to the survey. Many consumers believe that holistic support is not a “can do” for financial planners, but a “must do.”
Nearly half of consumers believe financial professionals have a responsibility to present protected lifetime income products to their clients. Forty-two percent of consumers who currently work with a financial professional would consider leaving their advisor if they did not present them all the possible strategies for producing income in retirement.
“In my mind, that’s a real wake-up call to financial professionals looking to hold on to their clients,” said Statler.
“Investors rated the importance of income protection more highly than financial professionals in this most recent study,” noted Gary Baker, president of CANNEX USA. “Given the uncertainty of when and how retirement will evolve over time, investors expect to understand the full range of solutions and strategies available, from which they can make an informed decision with the help of their financial professional.”
Blanchett research paper affirms findings
The survey’s findings correspond with a research paper released today by the Alliance’s Retirement Income Institute, which concluded that investors with professional investment management perform better in adverse economic conditions than self-directed investors.
The paper, authored by David Blanchett, managing director and head of retirement research for PGIM DC Solutions and research fellow with the Alliance’s Institute, analyzed the trading activity of 730,533 investors during 2020—a period of extraordinary market volatility brought on by the Covid pandemic.
Blanchett’s analysis found that participants using any type of professionally managed portfolio solution were significantly less likely to trade in 2020 than were self-directing participants.
Among participants who self-directed their accounts and who traded in 2020, older participants made changes that were the most significant. These participants were also significantly less likely to use a professionally managed portfolio option, which suggests that those participants who could benefit the most from professional investment management are not the ones receiving it.
The Alliance’s latest survey supports these findings in revealing that 73% of consumers who work with a financial professional think their retirement savings and sources of income will last throughout their lifetimes compared to 36% who do not work with a financial professional.
SEE ALSO:
• ‘Income Blueprint’ Tool Evaluates In-Plan Guaranteed Income Options
• RIAs, Broker-Dealers More Concerned Than Workers About Inflation, Recession
• Alliance for Lifetime Income Helping Elton John Say Farewell to Fans
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
