Inflation and market volatility are among the top financial consumer worries, with inflation leading the way with 67% of respondents expressing concern, according to a Lincoln Financial Group report.
“Of course, as everyday living expenses rise, there are downstream financial-planning impacts in how we budget, save and spend,” said Mike Burns, senior vice president, Individual Life, Lincoln Financial Group. So it’s not surprising that the second-ranked financial challenge is having enough income in retirement, which 55% of study respondents are thinking about.
It’s not uncommon to see retirement income as a top financial concern of consumers, but rising costs can potentially sharpen the focus by accelerating how quickly you draw down your retirement savings or requiring you to be more conservative in your spending, Burns added. Inflation can also impact your ability to save leading up to retirement. In any of these instances, your short- and/or long-term retirement plans can be impacted.
Compounding the retirement-income challenge is the market volatility we’re seeing today, which can impact retirement accounts, added Burns. While market volatility was just outside the top five concerns identified, it is still on the minds of 43% of those surveyed.
The study reflects ongoing concerns, as consumer prices released yesterday showed an increase of 8.3% last month from a year earlier. This higher-than expected increase continues a near 40-year high despite.
“If we continue to look at financial planning through the current events lens, it’s not surprising that businesses and employees are focusing on the importance of workplace benefits and how they fit into a financial plan," added Burns, as he explained another consumer challenge. COVID has influenced the benefit decision-making process of 56% of small-business owners surveyed, and the competitive hiring environment has increased the importance of benefits to attract and retain talent. In fact, he added, nearly 80% of employees surveyed see insurance benefits other than health insurance as a must-have or as very important when deciding to take a new job.
Helping consumers take action
While it’s important to identify the financial-planning challenges consumers are facing, what’s more important is helping them take action, Burns said. Despite more than 80% of consumers surveyed wanting to better understand how they can protect against inflation and market volatility, only about 1 in 5 have reviewed or made changes to investments or financial plans to address either.
There’s a similar trend happening among business owners: just 22% of small-business owner respondents have spoken with their financial professional about protecting against the loss of key people, said Burns. And just 43% have a formal transition plan that includes a financial strategy.
“That’s why, during Life Insurance Awareness Month currently under way, Lincoln is encouraging consumers to take an “if not now, when?” stance when it comes to planning for their financial futures,” Burns said. “To quote our company’s namesake, “leave nothing for tomorrow which can be done today."
Products to help address concerns
Consumers have several financial products they can use to help ease some of these concerns. For example, Burns said, permanent life insurance, including variable universal life and indexed universal life, can help address the potential impact of inflation and volatility.
These types of policies offer the potential to accumulate cash value that can be accessed as a financial resource for needs such as funding a child’s college tuition, supplementing retirement income or unexpected events. “They also offer investment options that may include indexed accounts to pursue market upside with downside protection,” he added.
Life insurance can also be an important tool for strengthening a business. In addition to protecting the future well-being of an employee’s family, life insurance can be used by businesses to fund buy-sell agreements, attract and retain top talent with executive bonus plans and protect from the financial impact of the loss of an essential employee.
Selling Life Insurance
With nearly 70% of life insurance owners surveyed saying they feel financially secure compared to 47% of non-owners, agents can take several steps to get consumers to get the life insurance they need.
First, they should make life insurance part of the planning conversation, advised Burns. Insurance is not a tangible possession; therefore, it’s often not top of mind. “But at the end of the day, it provides a foundation of protection for yourself and your family. That peace of mind is powerful,” he said.
As financial professionals have those conversations, a key to getting a client into the 70% category – the group of life insurance owners who reported feeling financially secure – is moving the focus from a financial purchase to peace of mind purchase, added Burns.
“Second, educate!” Burns said. According to the Lincoln research, 80% of U.S. adults have at least a basic familiarity of life insurance, particularly as it relates to death benefits. “However, there is an opportunity to educate consumers about the living benefits of life insurance, which can be used during a policy owner’s lifetime, as these are often unknown, overlooked or misunderstood, even though they can help address many of the financial planning challenges of today,” he added.
Education can help increase the relevance of life insurance for near-term and long-term financial planning needs and also help facilitate conversations that can break down misconceptions, such as those around cost. For example, LIMRA finds that more than half of Americans overestimate the cost of life insurance by as much as threefold, Burns said.
This survey includes several studies from November 2021 to June 22, polling more than 10,000 respondents, including consumers and small-business owners.
Ayo Mseka has more than 30 years of experience reporting on the financial services industry. She formerly served as editor-in-chief of NAIFA’s Advisor Today magazine. Contact her at [email protected].