‘Peak 65’ is Coming—And Retirement Advisors are Changing Because of It

Author: Brian Anderson, Editor-in-Chief

Date: 6/14/2023

View article on 401k Specialist

“Peak 65”—the point in time when more Americans will turn age 65 than at any point in history—will occur in 2024. Retirement advisors are taking notice.

According to new research released today by The Alliance for Lifetime Income (ALI) and CANNEX, an overwhelming 97% of advisors notice one or more modifications in their practice due to Peak 65.

“The retirement savings crisis is about to become a retirement income crisis, so advisors must do everything they can to help clients be better prepared”

Jean Statler

“As we hit Peak 65 next year, it’s encouraging to see more advisors go beyond simply managing retirement assets to protecting their clients’ retirement portfolios with annuities,” said Jean Statler, CEO of the Alliance for Lifetime Income, the nonprofit consumer organization that educates Americans on ways to protect their retirement. “The retirement savings crisis is about to become a retirement income crisis, so advisors must do everything they can to help clients be better prepared—especially those close to retirement.”

Jason Fichtner, senior fellow and head of the Alliance’s Retirement Income Institute, also sounded the alarm in today’s release. “Volatile markets, retirement portfolios that lost significant value in the past year, high inflation and the Peak 65 phenomenon all create a perfect storm of retirement insecurity for Americans, especially for those close to retirement or recently retired,” said Fichtner, who is also the Chief Economist at the Bipartisan Policy Center. “A variety of protected income solutions that can help solve this problem already exist, but advisors and the financial industry must act now to help their clients avoid this cliff.”

ALI notes that the fast-approaching Peak 65 milestone requires the urgent attention and collective action of retirement security stakeholders, including policymakers, the financial services industry, employers and consumers themselves.

That’s why ALI is calling attention to the first wave of its multi-part 2023 Protected Retirement Income and Planning (PRIP) study, which it bills as the only research of its kind that surveys both consumers and advisors simultaneously.

In its fourth year, the annual study examines the rapidly changing retirement planning landscape, its effects on advisors and their clients, sentiments around traditional investment strategies and retirement security, shifts in retirement planning strategies and the emerging role of annuities in portfolio allocations.

Changing approach

Findings from the study show advisors are reporting several changes in their practice and approach to retirement planning for clients. Among them:

  • 8 out of 10 advisors changed their retirement planning approach in the last year, and 4 out of 10 who changed put more into annuities.
  • Though over half believe the 60/40 stock/bond model remains a viable approach, 43% say other asset classes should be added.
  • 52% say the topic of “retirement income” has increased in conversations with clients.
  • Close to half say the 4% rule is no longer valid because of changes, like inflation, market volatility, and longevity.

Agreement but still a disconnect

The research also found advisors and consumers/investors alike see the value of protection.

  • 78% of advisors say protection is important when working with clients on retirement planning; however, even higher, more than 9 out of 10 clients believe protection of one’s retirement assets is important.
  • Advisors rate the importance of retirement income protection higher (81%) than asset growth protection (66%).
  • A majority (54%) believe their clients could spend more money if they added the protection of an annuity to the retirement income plan.

But despite apparent growing demand, a disconnect between advisors and consumers/investors still exists when it comes to annuities. Though 73% of advisors say they raise the topic of protection with clients, only 33% of investors polled agree.

And while nearly half of investors say they are extremely interested in owning an annuity, only 19% of advisors believe their clients have this level of interest.

As part of the 2023 PRIP, ALI released Chapter 1: Americans Change Retirement Savings Strategies, which examines shifts in consumer attitudes and behaviors toward retirement savings, and Chapter 2: Financial Professionals Change Approaches to Planning and Investment Allocations, which shows 97% of advisors notice one or more modifications in their practice due to Peak 65.

Following the release of these first two installments today and further analysis of the study data, ALI will publish additional chapters of the 2023 PRIP in the coming weeks. The sections include, Retirement Outlooks among Women Compared to Men and Growing Health-related Concerns in Retirement among Peak 65ers.

The 2023 PRIP was conducted among 2,507 American consumers ages 45 to 75, of which 546 are investors ages 45 to 72 who work with a financial advisor and have $150,000 or more in investable assets. The study includes 519 financial professionals who conduct retirement planning for individual clients and an oversample of Peak 65 consumers between 61 and 65.

For more information on the 2023 PRIP, visit protectedincome.org/prip.


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