Boomers Close to Retirement Want Guarantees

Despite the market’s recent strength, Transition Boomers—those ages 55 to 65 and closing in on retirement—said they would protect their retirement savings with a guaranteed return rather than chance a loss in the market, according to the “2013 Transition Boomers and Retirement Income Survey.”

Survey findings show 87% of Transition Boomers reported being more attracted to a financial product with 4% return, which is guaranteed not to lose value, over one with 8% return but with the possibility of losing value because of market downturns. This feeling was higher among women (91% vs. 82% of men), those with less than $50,000 in annual household income (92% vs. 83% of those with more than $50,000), and those without children at home (87% vs. 79% with children at home). Despite this attraction to guarantees, only 25% of respondents said they currently own an annuity, a product that can help answer the demand for guarantees.

“Our survey was taken when record stock market performance was generating daily headlines, showing that, regardless of how hot the markets are, Transition Boomers still crave protection for their retirement savings,” said Walter White, president and chief executive of Allianz Life. “There are financial products that can deliver these benefits, but the industry needs to do more to educate these Transition Boomers about them.”

When asked what they believe to be their most important remaining financial objective before retirement starts, “increasing my savings rate” was the top response among Transition Boomer respondents (29%). However, “a withdrawal strategy that ensures I won’t outlive my income” (14%) was ranked with near equal importance to “an investment strategy to grow my assets” (15%)–a sign that a key retirement issue annuities can address is growing in significance.

“Transition Boomers are telling us that withdrawal strategies are as important to them as growing their assets, but the industry has only recently begun to focus on this important aspect of retirement,” noted White, adding that the 10 years before retirement (i.e., the transition period) can be a time when Boomers build in income floors as a foundation of a withdrawal strategy.

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Income for Life 

Transition Boomers cited attributes that best describe annuities, with the majority (60%) noting that annuities can provide the “possibility of guaranteed income for life” and nearly half (49%) identifying that some annuities can offer “predictable growth of retirement assets.” Yet, overall knowledge about annuities is still low. When asked which statement best describes their knowledge of annuities, 75% of Transition Boomers reported a general lack of understanding, saying either “there’s a lot about annuities I’m not sure about” (37%) or “I haven’t got a clue” (38%).

One encouraging result is in respondents’ opinions about the most desirable features of an annuity. Forty-seven percent of respondents indicated they found the “opportunity for increasing income during retirement to help keep pace with inflation” as desirable. Recent innovations with annuities and income benefits that may be added as a rider for an additional fee offer this kind of opportunity to help keep up with inflation.

“Today’s annuities have advanced significantly in the past five years,” said White, adding that as concerns grow over rising health care costs, annuities exist that can help address inflation and offer a more stable retirement. The task ahead, he said, is to make sure Transition Boomers learn how these annuities can strengthen their retirement strategies.

The survey was conducted online by Ipsos U.S. eNation from March 15 to 25, with 1,425 panel respondents, ages 55 to 65, and commissioned by Allianz.