As the U.S. hits its “Peak 65” in 2024, where an estimated 12,000 Baby Boomers are set to retire each day, registered investment advisors (RIAs) are becoming increasingly aware of the retirement worries their near-retired clients face ahead.
A new survey by RetireOne and Allianz Life reveals the trepidations near-retirees grapple with today, finding that 97% of RIA respondents say clients are concerned about the impact of inflation on their retirement portfolios, while another 86% say some clients have expressed concerns about the adequacy of their Social Security benefits. Sixty-three percent believe their clients worry that employer-provided retirement benefits will not be enough to last throughout their retirement, and 93% report client concerns on healthcare costs.
Among other apprehensions include taking income from retirement investments (89%), the impact of geopolitical instability on portfolios (86%), outliving retirement savings (86%), and living the lifestyle they dream of in retirement (86%). Eight in 10 respondents also say their clients are asking about strategies to protect their income in retirement, up from 73% in 2022.
“We’re only months away from the year in which the greatest cohort of Americans will turn 65 in our nation’s history,” said Corey Walther, president of Allianz Life Financial Services, LLC, in a statement. “Given the ongoing risks to a retirement income strategy like inflation and market volatility, it is not surprising that so many respondents say their clients are asking about how to protect their income in retirement.”
“We’re only months away from the year in which the greatest cohort of Americans will turn 65 in our nation’s history.”
Corey Walther, Allianz Life
Due to increased worries, RIAs are placing more emphasis on retirement income planning and retirement savings. Yet, they’re facing several headwinds along the way, finds RetireOne and Allianz Life.
According to the data, more than a third of respondents believe that the safe withdrawal rate is less than the popular “4% rule”—a strategy that suggests retirees can safely withdraw 4% of their savings during the beginning of retirement, and then adjust for inflation thereafter.
Nearly half of respondents (48%) also anticipate U.S. equity returns to come in at two to four percentage points off historical averages, and seven in ten estimate the same for fixed income.
As a result of these obstacles, Allianz Life and RetireOne say more investment advisor representatives (IAR) are recommending fixed annuities. According to the data, nearly half of IAR respondents refer fixed annuities to clients in need of principal protection—an increase from 2022 and 2021. Nearly half of all respondents say their clients see the value of annuities in their portfolios—adding that for 88%, incorporating guaranteed lifetime income gives their clients the courage to spend confidently in retirement.
Among advisory annuities, 56% of respondents say they are likely or very likely to refer/recommend an advisory annuity for clients, while 18% report that they are unlikely to refer/recommend advisory annuities. Twenty-six percent remain neutral over the subject.
Still, RetireOne and Allianz Life finds that nearly a fifth of respondents are still reluctant in suggesting annuities to clients. Annuity critics were likelier to avoid referring annuities to their clients because of fees, liquidity, opacity, complexity, limited growth, fairness, payout rates, no fee-only options, and limited annuity experiences, among others.
SEE ALSO: