Download - Questions to be Answered:
Retirement Security and the Affluent
Walter H. Zultowski, Ph.D. WZ Research + Consulting, LLC
RIIA Webinar January 19, 2011
Questions to be Answered:
• What are the retirement security needs and concerns of the affluent?
• How are these needs and concerns changing?• What about the longevity risk?• How are they adjusting?• What about the use of annuities?• Are they getting help?
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Source:
• The Phoenix Wealth Survey• Annual survey of affluent households ($1M+ of net
worth, not including primary residence)• Conducted continually for 11 years; 2000 – 2010• Most recent data collected First Quarter, 2010• To be continued in 2011 as the “LIMRA Affluent
Monitoring Program”
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Retirement Security Needs and Concerns
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A Goal Most Important Goal
Comfortable std of living in retirement 87% 46%
Not running out of money in retirement 80% 23%
Health insurance in retirement 68% 3%
Long-term-care for self/spouse 66% 5%
Protect estate from taxes 60% 5%
Minimize income/capital gains taxes 47% 4%
Leave estate to heirs 45% 4%
Children’s college education 20% 5%
Transfer wealth to beneficiaries 19% 2%
Care for parents/in-laws 14% 1%
Source: 2010 Phoenix Wealth Survey
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Financial Goals
$1 - $2M $2 – 3M $3 - $5M $5M+
Comfortable std of living 47% 51% 47% 26%
Not running out of money 26% 18% 17% 17%
Long-term-care for self/spouse
4% 10% 6% 4%
Health insurance in retirement
3% 1% 3% 7%
Source: 2010 Phoenix Wealth Survey
Most Important Retirement Goals by Level of Wealth
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Inflation eroding value of assets 55%
Poor investment performance diminishing assets 51%
Assets depleted too quickly 50%
Unforeseen healthcare expenses wiping out assets 49%
Outliving assets 47%
Source: 2010 Phoenix Wealth Survey
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Financial Risks to Retirement Security
$1 - $2M $2 – 3M $3 - $5M $5M+
Inflation eroding value of assets
56% 59% 56% 43%
Poor investment performance diminishing assets
52% 52% 52% 41%
Assets depleted too quickly
53% 46% 51% 33%
Unforeseen healthcare expenses wiping out assets
52% 51% 47% 32%
Outliving assets 48% 49% 42% 37%
Source: 2010 Phoenix Wealth Survey
Financial Risks to Retirement Security by Level of Wealth
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How Are These Needs and Concerns Changing?
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Most Important Financial Goal Over Time
19%21%
25% 23%20%19%
47%46%
41%44%43%
46%
0%
20%
40%
60%
80%
100%
2005 2006 2007 2008 2009 2010
Not running out of money in retirement Comfortable std of living in retirement
Source: Phoenix Wealth Survey10
2007 2008 2009 2010
Inflation eroding value of assets
42% 50% 50% 55%
Poor investment performance diminishing assets
33% 39% 51% 51%
Assets depleted too quickly
36% 40% 44% 50%
Unforeseen healthcare expenses wiping out assets
43% 44% 42% 49%
Outliving assets 33% 35% 40% 47%
Source: Phoenix Wealth Survey
Financial Risks to Retirement Security Over Time
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What About Longevity?
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Current Age Median Life Expectancy
< 46 86
46 – 54 82
55 – 64 87
65 + 87
Source: 2009 Phoenix Wealth Survey
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The Psychology of Longevity
Better Than Peers
Much Better Than Peers
Same As Peers
Worse Than Peers
Much Worse Than Peers
30%
41%
6%
21%
The Psychology of Longevity
2%
Source: 2009 Phoenix Wealth Survey 14
Description of Current Health Relative to Peers
Importance of Longevity Planning
19%
33%
26%
17%
5%
0% 10% 20% 30% 40% 50%
Not At All Important
Somewhat Important
Important
Very Important
Extremely Important
Source: 2009 Phoenix Wealth Survey 15
How Are They Adjusting?
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No
Not Sure
Yes
9%
79%
12%
Planning on Retiring Full-Time Someday?
Source: 2010 Phoenix Wealth Survey 17
In Terms of Current Income 2006 2007 2008 2009 2010
Less than 80% 19% 17% 22% 21% 24%
80% to 100% 40% 36% 41% 36% 37%
100% 28% 32% 25% 29% 28%
101% to 120% 7% 8% 6% 6% 6%
Over 120% 6% 7% 6% 8% 5%
Source: 2010 Phoenix Wealth Survey
Definition of a Comfortable Standard of Living in Retirement
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The Use of Annuities
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Ownership Total $1 - $2M $2 – 3M $3 - $5M $5M+
Variable Annuities 18% 16% 16% 22% 27%
Fixed Annuities 15% 13% 16% 16% 25%
Future Purchase Intentions
Variable Annuities 5% 3% 5% 8% 16%
Fixed Annuities 4% 2% 5% 5% 16%
Source: 2010 Phoenix Wealth Survey
Use of Annuities by Level of Wealth
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Are They Getting Help?
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Total 72%
$1M - $2M 69%
$2M - $3M 71%
$3M - $5M 77%
$5M + 82%
Source: 2010 Phoenix Wealth Survey
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Percent With a Primary Financial Advisor by Level of Wealth
Primary Advisor Assists With…
Interested in Receiving from Primary Advisor…
Investing Advice 75% 7%
Financial Planning 67% 12%
Asset Allocation 54% 10%
Retirement Planning 54% 12%
Tax Planning 40% 18%
Estate Planning 37% 16%
Source: 2010 Phoenix Wealth Survey
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What Are They Getting Help With?
Total 26%
$1M - $2M 21%
$2M - $3M 27%
$3M - $5M 30%
$5M + 48%
Source: 2010 Phoenix Wealth Survey
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Percent With an Advisor for Life Insurance by Level of Wealth
No
Have Not, But Plan To
Yes
34%
29%
37%
Talked to an Advisor About Longevity Planning?
Source: 2010 Phoenix Wealth Survey 25
Asset Allocation Strategies 53%
Deferred Annuities 50%
Managed Distribution Offerings 48%
Payout Annuities 39%
Longevity Insurance 29%
Other 6%
Source: 2009 Phoenix Wealth Survey
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Longevity Planning Solutions Discussed
Observations…
• Wealth does not ameliorate retirement security concerns
• Traditionally, retirement security for the affluent was primarily about lifestyle protection
• The Great Recession has heightened their concern over all risks associated with retirement security, even the risk of outliving assets
• The affluent would rather change their lifestyle in retirement than continue working
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Observations (cont’d)…
• The affluent market is underpenetrated when it comes to annuities
• The affluent market is highly penetrated when it comes to having advisors
• But, the majority of those advisors approach retirement planning with an investment/asset allocation mindset rather than an insurance mindset
• Longevity planning, as a subset of retirement planning, is of interest to the affluent
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Opportunities
• Annuities, in general, should witness an increase in sales
• The bigger opportunity rests in positioning and promoting retirement security as an insurance problem, not just an investment/asset allocation problem
• Educate, and work with, investment-oriented advisors on this opportunity
• New products:– Insurance wrappers applied to investment
products/portfolios– Indexed annuities (a return play on the fixed portion of a
client’s portfolio)
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Questions?
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