By Arthur D. Postal
WASHINGTON – Perhaps half of all pre-retiree and retiree U.S. households with assets of at least $100,000 are interested in converting assets into guaranteed lifetime income for retirement, according to a new study.
The survey published by LIMRA’s Secured Retirement Institute comes as consumers, think tanks, the insurance industry and government appear to be focusing on whether Americans are properly preparing for retirement.
A poll released earlier this week by CBS found that most Americans who are not yet retired have difficulty juggling savings for retirement and paying their bills, and 64 percent are anxious about the amount of retirement savings they currently have. The poll also found that 55 percent think they will ultimately be financially ready to retire when they want to; 41 percent do not think they will.
At the same time, a new study published by Brookings Institution determined that guaranteed lifetime income annuities, also known as Qualified Longevity Annuity Contract, or QLAC, can play a key role in addressing the growing concern that retirees will outlive their assets.
And, the IRS and the Department of Labor last week issued guidance that gives the go-ahead for QLACs to be sold to consumers through target date mutual funds.
Non-retired Americans, younger Boomers (age 50-59), and those with assets between $100,000 - $499,000 are most interested in converting assets into guaranteed lifetime income for retirement, the survey by the LIMRA Secured Retirement Institute found.
“Our research shows that these demographic segments are less likely to have a defined benefit pension plan and will have to rely on their own assets to create retirement income,” said Matthew Drinkwater, associate managing director, LIMRA SRI.
Drinkwater said the survey found that 10 retirees and pre-retirees say having enough money to last their lifetime is a top priority, and nearly two thirds want to remain financially independent in retirement.
“Converting assets into a guaranteed income product, like an annuity, is a good way to ensure these goals are realized,” Drinkwater said he concluded as a result of the survey.
The 2014 study is “Finding the Right Mix: LIMRA Retirement Income Attitudes and Preferences.”
The study asked participants why they did not prioritize lifetime-guaranteed income. The top concerns pre-retirees and retirees mentioned include: guarantees potentially not keeping up with inflation; fear of locking in low rates of return, and lack of trust in companies backing the guarantees.
“But people’s perceptions are often due to a lack of knowledge and misconceptions about annuities,” Drinkwater said.
Drinkwater said that advisors and companies have an opportunity to help educate consumers about the benefits of annuities. He said the research has revealed that a high level of annuity knowledge translates into positive attitudes about the products.
“Taking the time to explain how these products are designed and the unique value proposition they offer can overcome these concerns and address the very things these consumers say are most important to them,” he said.
Arthur D. Postal has covered regulatory and legislative issues for more than 30 years in Washington, D.C. He can be reached at firstname.lastname@example.org.
© Entire contents copyright 2014 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.