Call them the usual suspects—demographics, increasing longevity and the demise of traditional pensions are fueling demand for retirement income strategies like never before, according to the Insured Retirement Institute.
In its annual “State of the Insured Retirement Industry” (read annuity) report released just before the holidays, IRI found that holistic retirement planning with a focus on income-generating strategies will help advisors address this demand while adding value to the client-advisor relationship.
“There has never been a greater demographic need for lifetime income strategies,” IRI President and CEO Cathy Weatherford said in a statement. “We’ve talked for years and years about how the baby boomers need to save for retirement. They are there now.”
She noted that 24 million Boomers are now 65 and older, and 33 million more will join them over the next seven years.
“The time has come to help them focus on the income that will support them throughout retirement. Developing holistic retirement plans, designed to generate lifetime income, will have an important part in helping them meet their needs and goals,” she added. “Financial professionals who embrace a holistic approach will be well-positioned in today’s market as they demonstrate value to their clients.”
On the public policy front, the IRI report joined the general confusion over whether or not the Department of Labor’s fiduciary rule will be delayed, modified or repealed by the incoming Administration.
Additional key findings from the report include:
- Promoting retirement savings and lifetime income:Public policy can greatly influence retirement savings and increase access to lifetime income strategies through workplace plans. IRI specifically identified the Retirement Savings and Enhancement Act, which would “provide clear rules to plan sponsors for including lifetime income products in workplace plans,” as legislation advancing these objectives. The legislation was unanimously approved by the Senate Finance Committee in September.
- Product innovation:The retirement income industry continues to innovate, developing products to respond to the interest rate environment and to the changing regulatory landscape. Regarding the former, insurers expanded the use of managed volatility funds when offering lifetime income benefits with variable annuities. They also expanded the use of custom indexes with volatility controlled overlays in fixed indexed annuities. In response to the regulatory landscape, the report finds that many companies began designing or expanded their lineup of fee-based products.
- Financial stability:The report finds that the life and annuities industry is financially stable headed into 2017. The credit rating outlook is stable, reflecting strong balance sheet fundamentals and liquidity, as well as disciplined asset-liability matching and operating performance.
- Economic engine: According to the IRI report, providers of retirement income products and services employ tens of thousands of professionals across the United States, contributing to economic growth as they work diligently to help Americans secure their futures.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
