Helping Insurers Capture More Retirement Assets

A new LIMRA study reveals that 45% of retirees still have their assets in their retirement savings plans with their employers, most frequently in their 401(k) plans, and almost a fifth of retirees own three or more IRAs in their households.  

Among the survey respondents, 23% said they have relationships with insurance companies.  The most affluent retirees, with assets of $100,000 to $500,000, are more likely to have relationships with insurance companies than any other market segments.  However, as a whole, retirees have only 9% to 10% of their assets invested in products and services offered by insurance companies.  

LIMRA suggests: 

1. Provide online resources.  According to LIMRA consumer surveys, retirees start to think about the decision of what to do with their retirement plan balance well in advance of retirement.  Providing online resources like retirement calculators and checklists can help insurance companies develop relationships with employees approaching retirement and build brand awareness. 
2. Be responsive and ready to react quickly. Once they retire, those that do roll over their assets move their money fast. Earlier LIMRA research shows the majority of retiree assets leave their employer-sponsored plans within the first 12 months of their retirement.  
3. Provide a comprehensive plan which creates a retirement income stream and addresses other risks retirees face.  Retirees and pre-retirees will typically need to make a series of retirement-related financial decisions starting at age 59 ½, the age at which they can withdraw from their tax-qualified assets without penalty, to age 70 ½, when they must take IRS required minimum distributions (RMD) from their qualified savings. In between, they have to evaluate when to take Social Security benefits and enroll in Medicare and its supplements. All of these financial decisions can be part of a retirement plan.  LIMRA research shows that many investors are buying guaranteed income annuity products at these key age-based financial decision points.  
4. Reach out to pre-retirees and establish a relationship before they enter retirement.  Existing relationships are critical to securing rollover business. A financial planner or adviser is often the first person retirees or pre-retirees consult regarding the rollover decision if they have an existing relationship. If possible, offering personalized investment guidance can be a way for companies to strengthen relationships and increase their chances of retaining assets. 
5. Offer guidance about taxes and other required distributions. Retirees both under and over age 70 need help managing their retirement plan assets to ensure they comply with all legal requirements.  Sixty percent of retirees above age 70 who are taking withdrawals are only doing so to meet IRS required minimum distributions, and they often take withdrawals through systematic withdrawal plans. The current research finds that most retirees get help from a financial professional or a phone representative to set up the plan. 

The online survey of retirees was conducted in October 2010. Qualified respondents were ages 55 to 79; had been retired for at least one year and had not worked for pay within the past year; and had household incomes of at least $35,000. Furthermore, qualified respondents were personally involved in making decisions about their household savings and investments.