Taking Baby Steps Toward Improving Retirement Outlook

The “retirement readiness” question is not really a question anymore. It’s bad and everyone knows it’s bad.

So the question becomes more about where we are going, and whether Americans are finally getting the message and saving more for their golden years.

Did the recession fallout lead to better investing for retirement? Is the Obama administration push for self-funded retirement accounts having any impact? Will the Department of Labor’s fiduciary rule choke off access to retirement planning advice?

The Insured Retirement Institute will address these questions and others during its annual Marketing Summit 2016. The three-day conference kicks off today in West Palm Beach, Fla.

The combination of a deep recession that hit in 2008 and millions of baby boomers who hit retirement age shortly thereafter left many people in dire straits, said IRI President and CEO Cathy Weatherford.

“We’re at that situation where we continue to be undersaved and less prepared for retirement,” she said. “We certainly know that 65 isn’t the retirement age any longer.”

According to the Social Security Administration, 34 percent of American workers have no savings earmarked specifically for retirement. Forty-six percent of all American workers have less than $10,000 saved for retirement.

Baby boomers face the most pressing situation, as many are at or closing in on retirement age.  An AARP survey found that 40 percent of boomers say their retirement plan is to “work until they drop.”

“Gen Xers and millennials still have decades,” Weatherford said. “I think that boomers who are already in those advanced ages are probably those who are having their moments of thinking that ‘this $140,000 that I thought would be safe and secure for retirement isn’t looking like it did.’”

Not ‘Highly Confident’

Earlier this month, IRI released a survey on the retirement fortunes of Generation X. The news there is not great either.

The Generation X refers to those born from the early 1960s to the early 1980s. Just 24 percent of them report they are “highly confident” they will have enough money to support themselves through retirement.

Only 8 percent of Gen Xers said they have enough saved to support themselves in retirement, the study said. Even among the oldest Gen Xers, those aged 44 to 53, only 11 percent have sufficient savings.

To determine if a Gen Xer has sufficient savings, IRI considered the amount needed for an individual to purchase a deferred income annuity that would generate enough annual retirement income to bridge the gap between the average Social Security benefit and average expenditures for a retiree.

IRI promises more new data at during its National Retirement Planning Week 2016 next month. The organization endorses holistic planning as the best way to tackle retirement investing.

The idea is to consider retirement goals, financial capabilities, long-term health care needs and general quality of life in one strategy. Depending on the situation, annuities have great potential to add guaranteed income and to be a key part of that discussion, Weatherford said.

“People are looking for income, stability, that monthly paycheck,” she said. “Awareness of that around the need for understanding what your monthly income is going to be. … There’s all-time consumer awareness and with awareness, I think, comes tremendous opportunity.”

Washington Politics

Saving for retirement is heavily on the minds of Washington lawmakers these days. The Obama administration is pursuing a two-pronged approach that is drawing equal parts praise and criticism from insurance circles.

The administration is pushing several plans to expand access to employee retirement plans. Ideas include auto-enrollment, and opening up multiple-employer plan rules to allow small businesses from different fields to offer joint plans.

Earlier this year, the administration rolled out the MyRa plan, which allows participants to save up to $15,000 for retirement, with no fees or risk of loss in principal. The funds are held in U.S. government debt, a safer alternative than stocks and corporate bonds.

“I think that’s all positive news because once somebody starts saving and seeing that growth, that’s the motivation and encouragement to save more,” Weatherford said.

But the Department of Labor’s fiduciary rule is another story. Slated to be published in the coming weeks, the rule would impose a fiduciary standard on anyone dealing with qualified funds inside retirement plans, employer plans and individual retirement accounts.

The administration contends that savers are losing much-needed retirement funds due to high fees and misleading advice from commission-based advisors. Opponents say the new rules will strangle the industry, forcing advisors to abandon small savers altogether.

“The other thing you can’t do as a regulator is create a cataclysmic event through a regulatory action, or activity or initiative that you create a chasm, a chasm so wide that the consumer can’t reach the provider of products and services to help receive planning advice,” said Weatherford, a former regulator for 30 years.

Like many who provided feedback on the rule, Weatherford is hoping the final rule is amended to allow advisors to continue to work with proprietary products, with a full range of annuities, and include time for the technology needed to meet compliance demands.

“We’re very hopeful that we’re going to see a final rule that is workable,” Weatherford said. “But we don’t know what we don’t know until we see it.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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