A new study finds that 64% of Latin American adults expect to have significant gaps in their retirement funds when they turn 60, and 52% don’t believe the income from their government-funded pension (Social Security) and their employer-sponsored pension will cover basic living expenses.
The study was conducted by Secure Retirement Institute and the Society of Actuaries (SOA)
Almost half of Latin American consumers consider it their responsibility to plan for retirement and do not want to depend on the government or family members, the study finds. Yet 55% of Latin America adults do not work with a financial professional to help them with their households’ financial decisions.
Researchers also found only 20% of adults in Latin America have undertaken at least one activity with regard to retirement planning and just under a third (30%) have a formal written plan to manage income, assets and expenses during retirement.
“Prior SRI (formerly known as LIMRA SRI) research has shown that formal retirement planning is a key indicator of retirement readiness and leads to greater confidence in one’s financial security in retirement,” said Alison Salka, Ph.D., senior vice president and director of LIMRA’s research program.
“This study uncovers an opportunity for financial services firms to reach these consumers through their employers. More than 7 in 10 say they would like their employer to provide more comprehensive information and advice on saving and retirement planning. Financial services companies can partner with employers to offer these services.”
Health Care Costs Top Concern
The study shows 83% of consumers in Latin America are worried about being able to pay for healthcare costs not covered by a supplemental health plan when they are in retirement. They are equally concerned about a chronic illness draining their life’s savings.
“Along with concerns about paying for healthcare costs, 8 in 10 Latin Americans worry about the government reducing social pension benefits and healthcare benefits. More than three-quarters of Latin American adults say they will rely on income from government-sponsored social pension programs for their retirement income,” said R. Dale Hall, FSA, CERA, MAAA, SOA managing director of research.
“However, with the projected number of Latin Americans over age 60 expected to double by 2050,1 there is significant threat to the viability of the government pensions.”
Guaranteed Income Products
One way to mitigate longevity risk is through lifetime guaranteed income products. Similar to the LIMRA-SOA retirement study in Asia, the majority of Latin Americans (62%) express interest in buying a financial product that would provide a guaranteed lifetime income, like an annuity.
Younger Latin American workers showed a greater interest for an option to receive a guaranteed annuity or income that has the potential to grow with the market.
Approximately 60% of Latin Americans say the two most important features when purchasing an insurance product to generate income, regardless of cost, were guaranteed income and the potential for investment growth. A product that protects their initial investment or adjusts for inflation were also highly rated.
SRI and the SOA conducted a survey of more than 6,000 consumers ages 30-75, across six markets in Latin America to examine the current state and future opportunity of the retirement market in Latin America.