Americans aren’t turning retirement plans into action, LIMRA finds

New LIMRA research finds that while most Americans approaching retirement have considered how they will generate income after leaving the workforce, many have yet to translate that awareness into a formal retirement plan or seek professional financial guidance.

According to the Retirement Income Readiness Report, 88% of preretirees have thought about retirement income, but half do not have a recently updated written retirement plan. Only 40% said they work with a financial advisor, while 76% reported either having no retirement plan or spending fewer than five hours planning for retirement over the past year.

"Most people, unfortunately, spend more time on their vacation planning than they do on their retirement planning," said Bill Nash, vice president and head of member relations and sales, LIMRA and LOMA. "I think the really big opportunity for us there is really access to guidance."

The report, which surveyed preretirees and retirees age 45 and older, found that nearly six in 10 preretirees consider themselves well prepared for retirement, while about four in 10 do not. Current retirees reported a similar assessment when reflecting on their preparedness before leaving the workforce.

Cost-of-living increases remain the top concern for preretirees, cited by 43% of respondents, followed by the possibility of outliving retirement savings, cited by 30%.

Working with an advisor is key

LIMRA said consumers who work with a financial advisor are significantly more likely to feel prepared for retirement. Seventy-seven percent of respondents with an advisor rated themselves highly prepared, compared with 47% of those without one. Among the least-prepared consumers, only 8% reported working with a financial advisor.

The study also found strong interest in guaranteed lifetime income products. Nearly three-quarters of preretirees said they want to learn more about protected lifetime income options, while 78% of respondents with a pension or annuity reported feeling highly prepared for retirement, compared with 50% of those without either source of guaranteed income.

Despite that interest, only 25% of preretirees believe their protected income sources will be sufficient to cover essential living expenses in retirement. By comparison, 52% of retirees said their protected lifetime income currently covers their basic living expenses.

Annuity sales have nearly doubled in five years to more than $450 billion. But studies like the new LIMRA report continue to point to a much-larger potential market. The challenge for advisors is to connect with more clients through education and better financial tools, Nash said.

"I think the industry has taken some really great strides in getting access to more guidance," he said. "But it's one of those things we look at with technology and some of the mediums to be able to deliver that guidance. We've got to continue to widen as an industry."

Taking the steps

The report also found that consumers who felt well prepared for retirement were more likely to have taken steps to learn about protected income options. Ninety-three percent of highly prepared preretirees said they had sought information on guaranteed income products, compared with 67% of those who reported low preparedness.

LIMRA said the research also found that retirement preparedness is influenced by more than accumulated savings. Among preretirees, wealth, retirement planning and access to protected lifetime income all contribute to confidence about retirement.

For retirees, wealth remains the primary driver of preparedness, while planning and guaranteed income continue to reinforce financial confidence.

The findings suggest insurers, retirement plan providers and financial professionals have an opportunity to improve retirement readiness by expanding planning resources, financial advice and access to products that provide predictable lifetime income, the report concluded.

Bryan Hodgens, senior vice president and head of LIMRA Research, echoed the growing demand for education and retirement income solutions.

"Consumers are telling us exactly where the industry can help," Hodgens said in a press release. "They value guaranteed lifetime income, they're worried about outliving their money, and three-quarters of them are raising their hands to learn more. The companies that meet that demand with clear education, accessible advice and products that address cost and control concerns will define the next decade of retirement security."

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