Muted Retirement Expectations Underscore Desire for Guarantees
MINNEAPOLIS, June 23, 2011 – Prior to the 2008-2009 financial crisis, baby boomers’ minds were set on high returns when investing for retirement. Today, for the second year in a row, boomers by nearly a 4 to 1 margin remain more attracted to guarantees for their retirement savings versus potential high returns with market risk, according to Allianz Life Insurance Company of North America’s (Allianz Life) 2011 refresh of its 2010 Reclaiming the Future study.
When asked which is more attractive, a financial product providing 4 percent return that is guaranteed not to lose value or one with 8 percent return that is subject to market risk and loss of principal, 76 percent of respondents chose the guaranteed product, nearly identical to the 80 percent of respondents in 2010.
“Despite a significant rebound in the equity markets since the financial crisis, this new study confirms that a ‘new normal’ mindset has dug deep roots in the minds of boomers,” said Allianz Life President and CEO Gary C. Bhojwani. “With the vast majority still in favor of more security for their savings, boomers tell us they are not interested in going back to return-chasing behaviors.”
New Normal Defined
Originally conducted in May 2010 with more than 3,200 people age 44-75, the refresh of Reclaiming the Future surveyed 439 of the same participants in March 2011—when the Dow Jones Industrial Average reached its highest point in nearly two years—to determine how attitudes about retirement planning have changed. Despite the recovery, the study revealed that boomers still have high anxiety about whether their retirement income will last and how prepared they are for the future. Their “new normal” mindset includes expectations of a sluggish economy, low investment returns, a more conservative investing strategy, expectations of delaying retirement and an increasing interest in seeking help from financial professionals.
Security Still Trumps Higher Returns
Having a source of guaranteed income will be important for boomers as pessimism about retirement preparedness remains unchanged. More than a third (35 percent) of respondents in both 2010 and 2011 said that, financially speaking, they feel totally unprepared for retirement – and a nearly equal number in each year (37 percent in 2010, 38 percent in 2011) said they have no idea if their income will last throughout their lifetime. In both years, fully half of respondents noted that they are extremely concerned about possibly outliving their income.
Expected Retirement Age Rises—But Not Everyone Will Be Able to Work Longer
One factor that has changed, however, is boomers’ expected age of retirement. Many now say they’ll need to retire later than they previously thought. In 2010, the average age of expected retirement was 63, but only one year later that average age jumped to 66.5. While many now plan to work longer, data from McKinsey & Company suggests that isn’t a foolproof way to supplement retirement income. In fact, according to their report, Cracking the Consumer Retirement Code, two in five people are forced to retire earlier than planned due to a number of factors, including layoffs or illness.
Receptivity to Financial Professionals Increasing as Boomers Seek Direction
While the percentage of boomers currently working with financial professionals remained nearly flat (26 percent in 2010, 27 percent in 2011), those who said they are now receptive to working with one increased (29 percent in 2010, 32 percent in 2011), and those who said they were not receptive decreased (25 percent in 2010, 21 percent in 2011). In terms of what type of guidance they want from their financial professional, boomers were increasingly looking to “create more safety and guarantees in my nest egg” (25 percent in 2010, 31 percent in 2011) and “understand the big picture for me financially” (29 percent in 2010, 37 percent in 2011).
Top Boomer Priority: Stable, Predictable Standard of Living
As a result of their uncertainty and anxiety, boomers now see their main retirement goals very clearly. When asked how to describe their retirement goals, 81 percent said one of their most important goals is having a stable, predictable standard of living throughout retirement.
“Given the ‘new normal’ that boomers are facing, and the increasing complexity of retirement planning, people will likely seek the assistance of a trusted financial professional more than ever before,” concluded Bhojwani. “Our updated study reinforces that the less rosy outlook will create increasing demand for boomers to learn more about how to create guaranteed lifetime income and security in retirement.”
For more information about Reclaiming the Future, visit https://www.allianzlife.com/MediaCenter/ReclaimingTheFuture.aspx.
About Allianz Life
Allianz Life Insurance Company of North America has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income goals with a variety of annuities and life insurance products. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with nearly 155,000 employees worldwide. Based on its revenue, Allianz SE is the 20th largest company in the world (Fortune Global 500, August 2010).
All guarantees are backed by the financial strength and claims-paying ability of the issuing company.
Allianz Life Insurance Company of North America offers insurance and annuities in all states except New York. Variable products are distributed by its affiliate, Allianz Life Financial Services, LLC, Member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. In New York, products are issued by Allianz Life Insurance Company of New York, New York, NY.