By Cyril Tuohy
A new survey by Allianz Life has found that Americans who are still in the workforce overwhelmingly prefer products with guarantees over products that have higher growth potential but a risk of losing value.
The results show that even with the strong performance of the stock market, demand for guaranteed income remains high.
“Hands down, Americans are saying their retirement saving strategy must include products and choices that offer guarantees, even though equity market have performed well this year,” Allianz Life vice president of consumer insights Katie Libbe said in a news release.
The survey, which gathered responses from 791 adults who are not retired, found that 78 percent of respondents said they preferred financial products with guarantees over products with higher growth potential.
When asked what they would most likely do with extra investment cash, 39 percent of respondents said they would buy a product that offers some potential for growth and some level of protection, the survey also found.
Despite the seemingly strong demand for guaranteed retirement income products, many employers have been slow to offer annuities through employer-sponsored retirement plans because of the long-term liability associated with them.
Employers don’t want to be sued in the future if the annuity doesn’t perform as promised or if the annuity company goes belly up.
When asked about the most important way to prepare for retirement five to 10 years before calling it a career, 41 percent said putting some money into a guaranteed income product was the best course of action.
Only 12 percent said the best strategy was to put money into equities, the survey also found.
Financial advisors often counsel retirees to secure basic living expenses using a financial product that guarantees income.
For people still in the workforce with plenty of time before calling it quits, advisors suggest weighing portfolios more heavily toward stocks to capture higher growth.
Among the respondents, 34 percent said that not being able to cover basic living expenses was their top concern in retirement, followed by 20 percent who said outliving their income was their top concern, the survey found.
In addition, the survey found that 17 percent of respondents said paying for health care costs was their top concern, 12 percent said seeing a big drop in retirement savings was their primary fear, 12 percent said keeping up with inflation was their No. 1 issue, and 4 percent said managing tax increases was their biggest challenge.
Cyril Tuohy is senior writer for InsuranceNewsNet. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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