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Key Themes and Insights from “Aligning Retirement Expectations with Financial Resources”
Retirement should be a time for retirees to slow down and enjoy the things that might not have been possible while they were still working. Being financially prepared can be a big part of being able to achieve that goal. Key statistics from the IRI’s research. “Aligning Retirement Expectations with Financial Resources,” provide insights into how many Americans feel about the accessibility of future retirement income sources.
- 60% of American workers surveyed nearing retirement or already retired are worried or do not believe income will cover expenses during retirement.
- More than half of near-retirees believe they will need more than twice what Social Security provides to make ends meet.
- 66% of retirees surveyed would feel more retirement security with more guaranteed lifetime income.
At the same time, the study also showed that many retirees and those nearing retirement are aware of what they can do to mitigate some of the issues they could face. Conversations about guaranteed income appear to be driven in part by how much information a group has received about annuities. Both groups were less likely to purchase an annuity based on hearing the name alone; however, they were more likely to consider them for their retirement portfolio when explained what annuities can do and how they work. In this case, near-retirees expressed greater interest in fixed index annuities, in part because of the group’s awareness of the probability of having to provide their own income in retirement. Near-retirees and those in retirement also appeared to have high confidence in financial professionals and prefer getting information on retirement products from them.
The need to add guaranteed income becomes evident through the reduction of employer-provided pensions. The IRI found fewer near-retirees expect to be able to supplement their income through pensions, increasing the potential need to purchase guaranteed income options.
Top Concerns for Retirees
The study also highlights a concern for near-retirees and retirees that looms over any other issue – health care and staying healthy. Roughly 70% of both groups said they worry about increasing health care costs and the impact of long-term care, specifically.
Over 60% of both groups are also worried about major expenses that might pop up, running out of money and being unable to afford their lifestyle. Here, a difference between non-retired and retired is clearly indicated – those who haven’t retired are over 10% more worried about not being able to financially sustain their lifestyles.
Income continues to be a top worry for near-retirees and retirees. Only 40% of near-retirees think pensions or Social Security will provide enough income, versus 65% of retirees.
Given the data, financial security plays an important role in providing a fulfilling and secure retirement experience, and findings suggest retirees are looking to guaranteed income sources to help fill potential gaps.
Annuities and the Impact of Financial Advice
While numbers in the study indicate that Americans are feeling less confident in their ability to fund retirement, they also understand there are options to help protect and grow their hard-earned dollars. The key finding here is that interest in annuities is tied to understanding their features and getting information is what matters to near-retirees and retirees.
Specifically, fixed index annuities (FIAs) were of high interest to both groups when their benefits were properly explained. While some products can provide greater potential for growth, FIA’s, fixed annuities and immediate annuities offer principal protection from market downturns and guaranteed income for life. In fact, 87% of near-retirees surveyed were likely to purchase a financial product described as a fixed indexed annuity.
Both retirees and near-retirees prefer financial professionals to explain products to them directly. Just as they prefer information to come straight from a financial professional, they also want them to take care of the transaction.
- 58% of retired and not retired respondents said they prefer to purchase products through a financial professional.
- 52% of retired and not retired respondents want to obtain information about products from a financial professional directly.
Trust and relationships are still a key factor when it comes to financial guidance and most respondents believe financial guidance is crucial in order to be prepared for retirement.
About the Study
As The Financial Dignity Company, we want to ensure our clients and financial professionals have the information they need to make educated and well-informed decisions when it comes to retirement income planning. In partnership with the IRI, the study, “Aligning Retirement Expectations with Financial Resources,” provides a snapshot of how current retirees and those preparing to retire in the next 15 years, feel about their confidence when it comes to retirement questions.
The IRI interviewed over 2,000 Americans aged 45 and older and asked them about retirement income, retirement products, communication about retirement products, and other topics. The data was collected in late 2021. The near-retiree and retiree groups were evenly distributed. The retiree sample included people that had been retired for at least five years, while near-retirees were no more than 15 years from expected retirement.
While only a sample of how Americans feel about retirement preparedness, this research helps us to continue to innovate in the retirement income planning landscape and discover new ways to help Americans find financial dignity in retirement.
The information provided in this blog was obtained from the Insured Retirement Institute study "Aligning Retirement Expectations with Financial Resources" in partnership with American Equity.
This content is for informational purposes only, and is not a recommendation to buy, sell, hold or rollover any asset. It does not take into account the specific financial circumstances, investment objectives, risk tolerance, or need of any specific person. In providing this information American Equity Investment Life Insurance Company is not acting as your fiduciary as defined by the Department of Labor. American Equity does not offer legal, investment or tax advice or make recommendations regarding insurance or investment products. Please consult a qualified professional.
Annuities are long term vehicles designed for retirement income and are not suitable for everyone. They involve restrictions and charges, including possible surrender penalties for early withdrawals. Annuity distributions are subject to ordinary income taxes, and if taken before age 59-1/2 may incur an additional 10% federal penalty. Guarantees are based on the financial strength and claims paying ability of American Equity and are not guaranteed by any bank or insured by the FDIC. Availability may vary by state. Possible interest credits for money allocated to an index-linked crediting strategy are based upon performance of the specific index; however, fixed index annuities are not an investment, but an insurance product, and do not directly invest in the stock market or the index itself. Product and feature availability may vary by state.