In the Face of a Potential Recession, Americans Feel Unprepared for Retirement and Are Looking for Protection
Half of consumers are more interested in protecting their retirement income since the start of the pandemic
New research paper from the Retirement Income Institute finds investors with professionally managed retirement investments perform better in adverse market conditions
WASHINGTON, September 28, 2022 – As the drumbeat of a potential recession grows louder and Americans continue to face the aftereffects of the pandemic, the number of Americans who believe their retirement savings and sources of income will not last them throughout their lifetime is on the rise. According to the third Protected Retirement Income and Planning Study from the Alliance for Lifetime Income and CANNEX, less than half of respondents (48%) believe their retirement savings and sources of income will last them throughout their lifetime—a 13% drop from a year ago. However, among those who have an annuity, 74% believe their savings and sources of income will last their lifetime, compared to only 43% for those without an annuity.
- Nearly two thirds of consumers worry about their finances several times a month or more; one quarter worry about their finances every day
- Only 35% of consumers believe they will be able to fund their “wants” in retirement
- Nearly a third of those not yet retired believe there is risk that they will be forced to retire early for reasons beyond their control
- Half of consumers are now more interested in protecting their retirement income since the start of the Covid pandemic.
The survey reveals a notable lack of financial preparation for the future. Despite mounting economic concerns, nearly one quarter of consumers don’t have any kind of financial plan and another quarter (28%) have an overall direction in mind, but no financial plan to get there. Nearly half of non-retired consumers ages 45-75 are saving less than 10% of their annual income for retirement. Among those not yet retired and who are advised by a financial professional, only three out of 10 have both talked with their financial professional and have a plan in place in the event they retire early.
“Consumers’ strong desire for protection amid this tricky economic environment is why the Alliance is relentless in helping people understand how to protect their hard-earned savings,” said Jean Statler, CEO of the Alliance for Lifetime Income. “Not surprisingly, consumers are turning up the heat on their financial professionals and asking them to find ways to protect their portfolios. Unfortunately, the research also shows that many financial professionals are falling short of what their clients expect and want.”
Just over half of consumers that work with a financial professional would give him or her an “A” for how much they listen and understand needs, according to the survey. Many consumers believe that holistic support is not a “can do” for financial planners, but a “must do.” Nearly half of consumers believe financial professionals have a responsibility to present protected lifetime income products to their clients. Forty-two percent of consumers who currently work with a financial professional would consider leaving their advisor if they did not present them all the possible strategies for producing income in retirement.
“In my mind, that’s a real wake-up call to financial professionals looking to hold on to their clients,” said Statler.
Gary Baker, president of CANNEX USA added, “Investors rated the importance of income protection more highly than financial professionals in this most recent study. Given the uncertainty of when and how retirement will evolve over time, investors expect to understand the full range of solutions and strategies available, from which they can make an informed decision with the help of their financial professional.”
Study Findings Affirmed by New Research Paper
The survey’s findings correspond with a research paper released today by the Alliance’s Retirement Income Institute which concluded that investors with professional investment management perform better in adverse economic conditions than self-directed investors. Authored by David Blanchett, managing director and head of retirement research for PGIM DC Solutions and research fellow with the Alliance’s Institute. The paper analyzed the trading activity of 730,533 investors during 2020—a period of extraordinary market volatility brought on by the Covid pandemic.
Blanchett’s analysis found that participants using any type of professionally managed portfolio solution were significantly less likely to trade in 2020 than were self-directing participants. Among participants who self-directed their accounts and who traded in 2020, older participants made changes that were the most significant. These participants were also significantly less likely to use a professionally managed portfolio option, which suggests that those participants who could benefit the most from professional investment management are not the ones receiving it.
The Alliance’s latest survey supports these findings in revealing that 73% of consumers who work with a financial professional think their retirement savings and sources of income will last throughout their lifetimes compared to 36% who do not work with a financial professional. Similarly, the survey found that consumers who work with a financial professional are more than twice as likely to have a pension or annuity.
Financial professionals looking to understand how the certainty of annuities can protect retirement portfolios and give their clients peace of mind during uncertain times, are encouraged to use the Alliance’s dedicated resource center at www.resources.protectedincome.org.
To learn more about the role of protected income in a retirement portfolio visit www.protectedincome.org for free educational resources and interactive tools, including the RISE Score® and the Financial Planning Personality Quiz.
About the Survey
The 2022 Protected Retirement Income and Planning Study was created by the Alliance for Lifetime Income and conducted online by Artemis Strategy Group in April and May 2022 among 2,025 American consumers ages 45 to 75, and 514 financial professionals who conduct retirement planning for individual clients.
About the Alliance for Lifetime Income
The Alliance for Lifetime Income is a non-profit 501(c)(6) educational organization based in Washington, D.C., that creates awareness and educates Americans about the value and importance of having protected lifetime income in retirement. Our vision is for a country where no American has to face the prospect of running out of money in retirement. The Alliance provides consumers and financial advisors with educational resources, interactive tools, and actionable research and insights to use in building retirement income strategies and plans. We believe focusing attention and conversations on retirement income that lasts throughout life leads to greater retirement security for millions of Americans. Learn more at www.ProtectedIncome.org.
CANNEX Financial Exchanges Ltd. supports the exchange of pricing information for annuity and bank products in North America. The firm provides financial institutions with the ability to evaluate and compare various guarantees associated with retirement savings and retirement income products. In the U.S. this includes the evaluation of annuity guarantees (Income Annuities, Variable Annuities, Indexed Annuities, and Fixed Rate Annuities) and consulting services supporting the optimization and allocation of retirement income portfolios.