According to a release of survey results, today’s affluent pre-retirees and retirees are most interested in managing their retirement income through traditional CD or bond laddering strategies implemented by themselves or through advisers. Variable annuities are second in familiarity and interest, while more recent innovations, such as target payout and absolute return funds, earned very little interest.
When affluent retirees’ and pre-retirees’ were asked which firm is the “best” among retirement income providers, no one firm was chosen by more than 10% of survey respondents, with the largest percentage of respondents saying they “don’t know” (26%), according to the survey. In addition, when asked to name the company they would be most likely to consider when purchasing a retirement income product, more than 30 different firms were cited, again with no single firm earning more than 10% of the vote—although Fidelity Investments and Vanguard did enjoy nods from one in six pre-retirees and self-directed investors.
Wells Fargo, Morgan Stanley Smith Barney, Edward Jones, Charles Schwab, Ameriprise, and Merrill Lynch were cited by 5% or less.
Cogent found that past experience (already use and like them) is more of a determining factor behind retirement income product selection than expertise in retirement income planning.
What Investors Want
“We’ve found a variety of factors responsible for this seemingly rudderless market, not the least of which is the incredibly high expectations of today’s retirees and pre-retirees,” said Cogent Principal and co-founder Christy White. “In theory, pre-retirees love the idea of a guaranteed paycheck, but in reality they are unwilling to give up control of their principal for too long—and certainly not forever.”
However, the survey found that pre-retirees are willing to make other sacrifices to have the type of retirement they want, including delaying retirement, saving more, and continuing to work while in-retirement. In fact, nearly half of all affluent pre-retirees (49%) say they will continue working in-retirement to augment their income, while less than one-quarter (24%) of current affluent retirees rely on employment income.
In all, pre-retirees expect to draw on 7.5 sources of income in retirement, and they expect to tap those resources much earlier in retirement than did their retired peers.