Data & Research April 8, 2013

Advisers Increase Boomer Retirement Confidence

Baby Boomers’ confidence in doing a good job preparing financially for retirement has declined.
Reported by

The Insured Retirement Institute’s (IRI’s) third annual “Boomer Expectations for Retirement” survey found 37% of Boomers are confident in their retirement planning efforts in 2013, down from 44% in 2011. The survey indicates working with an adviser makes a significant difference in Boomer confidence regarding financial preparation for retirement.    

Forty-eight percent of Boomers who work with an adviser said they are extremely or very confident with their financial preparations for retirement compared with 28% who do not work with an adviser. Ninety-four percent of Boomers who work with an adviser have savings for retirement compared with 64% who do not work with an adviser.    

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In addition, 71% of Boomers who work with an adviser have calculated a retirement savings goal compared with 34% who do not work with an adviser. And, Boomers who work with an adviser are more likely to rebalance their portfolios: 45% of Boomers who work with an adviser rebalance their portfolios once a year compared with 24% who do not work with an adviser.  

During a conference call hosted by the IRI to kick off National Retirement Planning Week, Greg Cicotte, president at Jackson National Life Distributors, said planning for retirement is a process over an individual’s years of retirement. A person’s needs at age 65 are different from needs at age 75 or 85, he noted, adding that it is important to keep in touch with financial advisers throughout retirement.

(Cont’d…)
Seventy-nine percent of working Boomers responding to IRI’s survey stated employment in retirement will be a source of income, an increase of 12 percentage points from the 2011 survey. The survey also shows a trend in planning to retire later: in 2013, 18% of Boomers stated they were planning on retiring at age 70 or later, compared to 11% in 2011.    

Of those Boomers who do not know at what age they will retire, the most common reason given was insufficient savings, stated by one-quarter of respondents in 2013.    

Retired Boomers have higher levels of confidence in meeting their financial needs in retirement. This is attributed, in part, to different retirement income sources for retired Boomers compared to working Boomers, who will more likely need an alternative source of lifetime income.Forty-eight percent of retired Boomers stated a traditional defined benefit pension plan is a major source of income in retirement, and 34% said a defined contribution plan is a major source.  

(Cont’d…)
By contrast, 38% of working Boomers expect a traditional defined benefit pension plan to be a major source of income in retirement, and 45% expect a defined contribution plan will be a major source. 

Boomers experience financial difficulties and have financial demands competing against saving for retirement. The survey found 24% of Boomers have trouble paying their mortgage/rent; 22% of working Boomers have stopped contributing to a retirement savings plan; and 21% of Boomers have postponed their plans to retire.  

The costs of college education for their children and caring for aging parents are also important considerations. Sixty-nine percent of Boomers are not confident they will have enough money to pay for their children’s college education, and 75% are not confident they will have enough money to pay the long-term care expenses of their parents.  

Charlotte Mooney, head of individual retirement markets marketing at ING U.S. Retirement, stated during the conference call that employers say employees need a complete financial solution, including a holistic plan for retirement from accumulation to asset allocation to decumulation, general financial literacy and a plan for short-term needs such as paying down debt and paying for children’s college education. Employers want to provide employees with actionable steps, and ING research shows employees expect this education from employers, she concluded.  

A complete report of IRI’s survey findings can be found at http://www.irionline.org.

Data & Research April 8, 2013

Relationships Foster Success in Rollover Market

Retirees who have a positive relationship with their plan provider are more likely to keep their assets with that provider, a study found.
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According to a LIMRA study, “Asset Retention: Keys to Success in the Rollover Market – 2012 Results,” each year, more than $350 billion becomes available for rollovers as retirees and pre-retiree workers leave their employers. The challenge for plan service providers is to find ways for their company to keep plan participants’ money under their management.

“We found that nearly 40% of participants make the decision to stay with their current plan provider, either through a retail or institutional relationship,” said Matthew Drinkwater, associate managing director, LIMRA Retirement Research. “It’s important for plan service providers to proactively reach out to participants. Those who have strong relationships and satisfaction levels with their plan provider are more likely to stay with them.”

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The study found that several factors influence participants who stay with their plan: 

  • Retirees and pre-retiree terminations who were contacted by their plan providers when they left their former employers were much more likely to keep their money with the provider;
  • Personalized investment guidance and discussions of post-retirement needs in the years leading up to retirement; and
  • Financial advisers influence decisions to switch companies; but individuals whose decisions were influenced by provider-affiliated professionals were three times as likely as those influenced by non-affiliated professionals to stay with the plan provider.

(Cont’d…)

On the other hand, says the study, nearly half of retirees and preretirees have not yet made an affirmative decision to keep their money in their current plan. Among those who roll over assets with another company, many cite consolidation of assets as the reason. Similar to past LIMRA rollover studies, the “three Cs” of consolidation, control, and convenience appear to be the top reasons for switching plan providers.

With rollovers to IRAs projected to grow to $575 billion in the next three years, Drinkwater noted that it is worthwhile for providers to pursue assets. “The study told us that in addition to reaching out to participants, the method of contact matters,” he said. “An in-person visit or a phone call is more personal than an e-mail or direct mail, and works better in building a positive relationship.”

Conducted in 2012, the LIMRA study surveyed 2,131 recent retirees and preretirees (ages 55 to 70) who terminated with their employer in the last three years, were involved in making financial decisions for the household and had at least $10,000 in their defined contribution plan at the time of retirement and/or termination.

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