Introducing 5 Profiles of Americans Planning for Retirement

Introducing 5 Profiles of Americans Planning for Retirement

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When

the Alliance analyzed the data for its 2020 Protected Lifetime Income Study, a conflicting portrayal developed of Americans planning for retirement. Survey respondents are optimistic about retirement, but they’re also less certain about their retirement income. They value protected income in retirement, but they also don’t know enough about the products — annuities — that provide it.

To help resolve these disconnects, the Alliance conducted pioneering analysis to better understand the emotional and behavioral patterns of Americans as they plan their financial futures. Instead of typical demographic information such as ages and investable assets, we focused on people’s dreams and hopes for retirement, the way they approach financial decisions and the actions they’re taking today.

Our goal was to create distinct personalities of Americans planning for retirement that would not only help us better analyze data but also lend insight to financial professionals as they have discussions with clients about their goals for retirement, including their interest in protected income. A main finding of this year’s PLI Study is that 60% of the participants believe the benefits offered by annuities are very important, but they need more education about them.

The PLI Study’s large sample size — 3,036 participants in a Census-balanced survey of Americans age 25 to 74 — provided the robust volume of data the Alliance needed to develop distinct groupings of Americans planning for retirement. We categorized the survey respondents primarily based on their answers to questions in three categories:

  • Dream: Their overall outlook and life expectations, expectations for retirement and vision of retirement.
  • Decide: Their decision-making style, risk tolerance and influences on decision-making.
  • Do: Their time and attention spent on retirement planning, level of knowledge about retirement planning and current depth of retirement plan

In all, five distinct profiles emerged from the study. Each profile has a different outlook on retirement. Each also has different financial decision-making characteristics as well as level of financial planning and preparation. As a group, the profiles below are a comprehensive picture of Americans who are planning for retirement, broadly representing Americans of all ages, income levels and backgrounds.

Profile:

Optimistic Dreamers

These individuals are open-minded extroverts with a sunny outlook about their retirement. They seek a retirement with new experiences and activities that benefit society. In making financial decisions, they trust mainly their family and friends as well as their own instincts.

Although optimistic about retirement, they tend not to have concrete plans for this stage and have just a general financial plan. Most (51%) have a basic understanding of retirement needs but aren’t comfortable with their level of knowledge and don’t spend much time on planning.

This group tends to have low familiarity with annuities and moderate interest in them, but 63% could be persuaded to buy one.

Demographic information:

  • Median household income: $62,000
  • Median household assets: $38,000
  • Age range: 25-64

Other characteristics:

  • Moderately conscientious
  • Risk profile: low to none
  • Annuity benefit to leverage: provide guaranteed income for as long as you live (57% of group)
Value new ideas, creativity, social causes in retirement
Have only a general financial plan
Say rising healthcare costs is their top concern
Profile:

Cautious Preparers

These retirement planners are quiet, conscientious and maintain familiar, proven practices, shunning uncertain concepts. They want to prepare for the worst in retirement and seek safety and security.

Most have specific goals for retirement and 48% are knowledgeable about planning, but they want to know more and need to further develop their plans. These individuals do their own research but place the most trust in financial advisors.

The most appealing message about annuities for this group, at 55%, is that they provide a stable rate of return. As a result, these individuals are likely more interested in a fixed annuity.

Demographic information:

  • Median household income: $88,000
  • Median household assets: $125,000
  • Age range: 45-54

Other characteristics:

  • Risk profile is balanced
  • Annuities: moderate familiarity and interest
Value being prepared for whatever comes their way in retirement
Have specific goals for retirement but not a well-developed plan
Say rising healthcare costs in retirement is their top concern
Profile:

Uncertain Strugglers

This group is generally pessimistic with low expectations for their ability to enjoy retirement. They tend not to explore new ideas, preferring to stick with what they know. They value having their health in retirement so that they can do what they want to and have control over the direction of their life.

They expect retirement means being adaptable and taking things as they come because most don’t have a financial plan for retirement and 53% have a low knowledge base. They tend to place most of their trust in family regarding financial decisions.

Members of this group don’t know much about annuities. They also have low interest in them, but 63% could be persuaded to buy one.

Demographic information:

  • Median household income: $43,000
  • Median household assets: $13,000

Other characteristics:

  • Least conscientious group about retirement planning
  • Not having a source of lifetime income is among top concerns
  • Annuity benefit to leverage: won’t lose the original money you invested (principal protection) (57% of group)
Value control over direction of their life in retirement
Don’t have a plan for retirement
Say not having enough savings or assets in retirement is a top concern
Profile

Purposeful Planners

Members of this group are self-assured and conscientious about their retirement planning, and they’re somewhat open to new ideas. They’re optimistic about their ability to enjoy retirement.

In planning, they seek approaches that protecs them from the unknowns. As a result, their concerns center on financial risk and volatility. Many of these individuals (58%) have a solid foundation of knowledge about retirement.

The main annuity benefit to leverage for these individuals, at 60% of responses, is annuities’ ability to provide protected income for life.

Demographic information:

  • Median household income: $125,000
  • Median household assets: $325,000
  • Age range: 45-64

Other characteristics:

  • Place most trust in financial advisors but also do their own research
  • Annuities: high familiarity, moderate interest
Value a retirement that allows them to have a well-rounded life
Have at least a general plan for retirement, and most have a specific plan
Say the risk of financial surprise is their top concern
Profile:

Ambitious Risk-Takers

These high-energy individuals are confident, ready to use their imagination and seek new opportunities. They’re highly optimistic about their current life, and they expect adventure and new experiences in retirement. They’re also interested in promoting social causes.

The want to be strategic and plan for retirement, and most have a specific plan in place. They place the most trust in financial advisors but supplement their guidance with their own research. Their risk profile ranges from balanced to high.

The ability of annuities to generate a steady income stream in retirement was the top benefit for this group, garnering a positive response from 69% of these individuals.

Demographic information:

  • Median household income: $125,000
  • Median household assets: $125,000
  • Age range: 25-44

Other characteristics:

  • 56% are knowledgeable but want more information
  • Annuities: high familiarity, high interest: 56% could be persuaded to purchase one
Value good times and new experiences in retirement
Have at least a general plan for retirement
Say rising healthcare costs is their top concern

For more information about the five profiles of Americans planning for retirement, read our 2020 Protected Lifetime Income Study and Segmentation Report.

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