By Jafor Iqbal
Media often depict retirement as idyllic — a couple holding hands and taking a long walk by the water or sitting on a white beach in a pair of easy chairs. Rarely are single retirees portrayed similarly. However, single retirees are an important part of the U.S. retirement market. Should advisors view the single retiree market differently? They should.
The Single Retiree Market Is Big
According to LIMRA Secure Retirement Institute’s analysis of the Federal Reserve Board’s 2016 Survey of Consumer Finance data, there are 7.6 million single pre-retirees and retirees aged 55 or older in the U.S. with investable assets of $100,000 or more — nearly two-thirds of them are single women. In addition, single pre-retirees and retirees control $6 trillion in investable assets. This represents great opportunity for financial professionals.
Single retirees face unique retirement challenges compared with their married counterparts. In general, single retirees are largely responsible for their own retirement security, which includes their financial, emotional and physical well-being. As these individuals face these challenges, it is critical that they exercise prudence — and seek an advisor’s help — when making decisions about retirement.
Single Women Retirees Feel Less Confident
A new LIMRA SRI study of more than 1,100 single retirees with annual incomes of at least $35,000 finds single retirees — particularly single women retirees — feel less secure about their financial security in retirement and are more concerned about outliving their savings than those who are married or have partners. These concerns are more pronounced with single women retirees. More than 4 in 10 single retired women worry that their savings and investments will not last if they live to be 90 years old, compared with just 3 in 10 single retired men.
Apart from higher longevity risks — especially for women — there are other reasons for low retirement confidence: (1) single retirees may have no one to rely on; (2) single retirees spend proportionately more of their income on essential expenses such as housing, food and utilities than couples do; and (3) many single retirees do not own their primary residences. The study shows that many single retired women underestimated their expected expenses primarily because of higher expenditures for housing and the need to provide financial support to (mostly younger) family members.
Working With An Advisor Improves Outcomes
LIMRA SRI finds single women retirees greatly benefit from working with an advisor. Those single women retirees who work with an advisor are more risk tolerant, are more knowledgeable about investments and have more confidence in their retirement security.
Despite having considerable income, 40 percent of single women retirees who do not have an advisor have zero risk tolerance — four times higher than the women who work with an advisor. Three-fourths of single women who work with an advisor are confident about being able to live the retirement lifestyle they want, compared with about half of the women without an advisor.
In addition, the confidence of single retirees gets a boost from higher annuity ownership and higher likelihood of having an income plan when they work with an advisor. Annuity ownership is double among single retirees with an advisor compared to retirees without one. Advisors also completed a formal income plan for one-third of their single retiree clients.
Advisors Benefit From Working With Single Women Clients
Advisors who work with single women clients will be rewarded. Half of single women retiree clients consolidated 90 percent or more of their assets with their advisors — twice as much as single men clients. Nearly one-third of women clients trust their advisors with 100 percent of their assets — a proportion three times higher than that of single men retiree clients.
This trust and reliance on advisors have important future implications. More than one-third of single retirees want to rely on their advisors for more help in financial decision-making as they age. Therefore, the capacity and skill to deliver a personalized formal income plan will be the key to building growth in this market. Advisors should consider relationships with their single retiree clients as longterm and prepare accordingly. Advisors helping clients with a solid plan will have an edge over their competition by making their single clients confident and lifetime loyal clients.