Agents today have a unique opportunity to meet an imminent need for retirement age individuals and those just beginning to consider the end of their working careers. According to a new report by the Government Accountability Office (GA) entitled “Most Households Approaching Retirement Have Low Savings,” it was revealed that through 2013, 52% of U.S. households of people 55 and older had NO retirement savings in a defined contribution plan or IRA, forcing Social Security to provide most of the post-retirement income for half of households with individuals age 65 and older (1).
The report’s scope also reveals that the other 48% of households age 55-64 have an average savings of only $104,000. This number is $148,000 for households age 65-74. At the same time, 29% of households age 75 and up have retirement savings with the median being approximately $69,000. More than half of these (55% do have a defined benefit (DB) pension plan, but 35% lack both a significant retirement savings and a DB plan, putting them in very vulnerable financial straits (1).
Summing up the results of the research, which are worth a look in full, GAO stated that their studies generally find about one-third to two-thirds of workers “at risk” of falling short of maintaining their pre-retirement standard of living in retirement.
But what do these striking figures mean for our industry?
1. This savings crisis is occurring in tandem with another demographic shift in America. As more and more Americans heading into retirement age find themselves without the means to retire comfortably, they will continue to work, pushing back the average retirement age. Meanwhile many who do have the means to retire are deciding that they enjoy working in some capacity and continue being involved in the economy, changing the definition of retirement itself. More Americans age 60 and older will, in fact, be working part time as long as they are able and perhaps well into their 80s+.
2. There is an education gap that agents need to overcome when discussing retirement with their customers. Consumers don’t know what they don’t know and the many options for retirement accounts, annuities, 401 K’s, and more are lost on many of them. With the pension system largely dismantled customers need to know what their options and their targets are in order to have a comfortable and secure future so they choose the lifestyle they want—whether it looks like traditional retirement or not.
3. Generational approaches and needs have bifurcated when it comes to retirement planning. Baby boomers need immediate assistance and products that interact with delayed retirement, longer lifespan, and mitigation of unforeseen problems like sudden medical costs. Millennials (age 35 and down), on the other hand, often display a depression-era approach to investing (a legacy of the Great Recession) that sacrifices investment opportunity in favor of accessible cash.2 Agents in the insurance and financial markets need to understand these different mindsets and be willing to innovate and intervene with the right authority, the right products, and the right approach.
For more detailed information, tips, and training opportunities covering the interactions between retirement strategies, insurance marketing, and generational approaches to sales you are welcome to contact the specialists here at Imeriti Financial Network at 800.921.3100 or via [email protected].