Seventy-three percent of people surveyed for the Guaranteed Lifetime Income Study from Greenwald & Associates and CANNEX said they view guaranteed income as a valuable addition to Social Security, up from 61% a year ago. The survey was conducted among 1,003 pre-retirees and retirees between the ages of 55 and 75 with more than $100,000 in household assets in February.

The survey found that two primary reasons why people value guaranteed income are to cover health care costs (cited by 54%) and to prevent running out of money (46%). Fifty-two percent said they view guaranteed income as a hedge against a market downturn.

“The perceived need for guaranteed lifetime income products continues to rise with fewer retirees being able to count on pension plans,” says Doug Kincaid of Greenwald & Associates, who oversaw the survey. “In this year’s data, we found many respondents confident they’ll be able to maintain their lifestyle through their own projection of their life expectancy, but the less affluent and women, in particular, are concerned about their ability to meet their needs if they live beyond this. Other research has shown that more than half will wind up living longer than they expect.”

While only 17% of those with more than $1 million in assets are highly concerned about meeting their financial needs in retirement, for those with assets between $100,000 and $249,000, 43% share this concern. While 25% of those with a pension are concerned about outliving their retirement savings, this can be said of 38% of those without a pension. Greenwald & Associates said this is a key finding, as pension plans continue to be a thing of the past.

Additionally, 37% of women are highly concerned about outliving their savings, while only 22% of men share this concern. On average, people expect to live to age 85, and roughly 80% of people are confident they will have enough money to reach that point. In fact, 53% are highly confident they will have enough money until age 85. However, for those with assets between $100,000 and $249,000, only 43% have this high level of confidence, but for those with more than $1 million in assets, this rises to 74%.

Should they live five years beyond their expected longevity, only 38% are confident they will be able to maintain their lifestyle, and should they live an additional 10 years, this drops to 31%. The respondents indicated they expect a substantial drop in income when they retire, but that it will remain steady afterward. Roughly 40% of pre-retirees said they expect annual income of less than $50,000. Twenty-three percent expect income of $50,000 to $75,000, and 16% expect to receive $75,000 to $99,000. Less than 20% expect to receive more than $100,000 in retirement income.

While 25% expect their expenses will be higher in early retirement, 38% expect they will increase in later retirement. Fifty-three percent of respondents between the ages of 65 and 69 believe the value of their assets will grow in 10 years, as do 48% of those between the ages of 70 and 75. Only 19% and 13%, respectively, think their assets will be lower in value.

“Respondents are optimistic that market growth in their savings, along with a lower level of expenses, will enable them to maintain their quality of life in retirement,” says Gary Baker, president of CANNEX USA. “Given limited savings and rising costs, drawing down assets will be a necessity for most retirees, making the risk of running out of funds a question of time without lifetime income strategies.”

Evaluating guaranteed lifetime income products

Asked about the main benefits of guaranteed lifetime income products, 66% said it is the protection against longevity risk, peace of mind and making it easier to budget. As for the negatives, respondents said ease of understanding, and excessive terms and conditions of the contract.

Thirty-nine percent of respondents said they had heard about annuities from an adviser, while 23% pointed to financial institutions. Seventy-percent think their adviser has a responsibility to discuss guaranteed lifetime income products with them. If they don’t, the respondents would consider switching to another adviser. Among those with an adviser, 66% are highly satisfied with the advice, and when retirement income strategies are discussed, the level of satisfaction rises. Nonetheless, only 50% of those with an adviser have had a conversation about retirement income strategies.

Sixty-two percent said their adviser had said positive things about guaranteed lifetime income products and annuities, but 37% said their adviser’s assessment was either neutral or negative. They also said that media coverage of annuities and lifetime income products is largely negative.

“There are significant operational challenges the financial services industry still needs to overcome to broaden access to annuities, in addition to addressing negative perceptions around them,” Baker says. “The study shows that the conversation really starts and ends with adviser discussions.”

Among those who own a guaranteed lifetime income product, 63% said they are highly satisfied, and 73% said the product is highly important to their financial security.

Kincaid says that advisers need to consider each individual’s risk tolerance when working with them on selecting a guaranteed income product.