The Markets
Investors Not Flocking to New Retirement Income Products
Despite a proliferation of retirement income products and financial services firms’ best efforts to capture the retirement income market, no single leader has emerged in this space, according to Cogent Research’s In-Retirement Income 2010 report.
Reported by Rebecca Moore
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.