Benefits September 23, 2013

Gen X Most Concerned About Adequate Retirement Savings

September 23, 2013 (PLANSPONSOR.com) – Generation X employees are more concerned than their younger and older counterparts about having enough saved for retirement, according to a new study by LIMRA.
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The study found that more than one-third (36%) of Generation X employees had this concern, compared with only one-quarter of Generation Y employees (ages 18 to 32) and three in 10 Baby Boomers (ages 49 to 68).

“While many Gen X Americans are in the prime earning years, they are less likely to have a defined benefit [DB] plan than Boomers and more likely to be aware of risks associated with retirement and the challenges they face to save enough to achieve a secure retirement than younger consumers,” said Alison Salka, corporate vice president and director of LIMRA Retirement Research, Windsor, Connecticut. “They also may be managing multiple financial demands like saving for a child’s education or helping older parents. Meanwhile, Baby Boomers probably already have a realistic picture on their retirement outlook.”

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The study found that less than 20% of Americans are very confident they will have a secure retirement. Boomers and Gen Xers are least likely to feel very confident about achieving a secure retirement (13% and 14%, respectively), while 21% of those in Generation Y said they are very confident they will have a secure retirement.

The study asked people to define retirement security. The top three descriptions chosen were “living comfortably” (24%), “having financial freedom” (23%) and “having peace of mind” (16%). Nearly three-quarters of those surveyed said they have taken at least one step toward a secure retirement. Contributing to an employer-sponsored retirement savings plans was the most common step among full-time workers. Workers ages 55 and older were found to be more likely to have taken more steps, including calculating their retirement income, discussing retirement planning with a professional, and projecting what their retirement expenses will be.

LIMRA also found that only half of those surveyed claim to be somewhat or very knowledgeable about investments and financial products. Women, younger Americans and lower-income Americans scored lower than their counterparts.

“In our most recent study, six in 10 women felt they had little or no knowledge of financial products and investments compared with four in 10 men,” said Salka, “Interestingly, women and men had similar average scores on a financial literacy quiz LIMRA offered earlier this year. Research has shown that women control or play an important role in most households’ financial decisions, yet they still don’t believe they have the knowledge they need.”

According to the study, nearly half of Americans—more likely men and those with higher incomes—claim their financial knowledge was self-taught. Forty-six percent of Generation Y consumers list their parents and other family members as their primary source of information, while one-quarter of this same group cited learning from the mistakes of others.

Americans are interested in learning more about various financial topics, Salka noted. The study found that nearly four in 10 people are interested in learning more about generating retirement income; three in 10 want to learn about investment basics; and 25% want advice about how much to save and where. These statistics increase when looking only at responses from Generation Y.

“Retirement readiness is in the news these days, but, without the knowledge or guidance to help them make appropriate choices, consumers are likely to fall short of their financial goals,” said Salka. “The industry can take advantage of this appetite for knowledge by implementing financial literacy programs to help consumers learn how to budget, get out of debt, save and plan for retirement. This will benefit not only the industry but the nation as a whole.”

The study findings are based on a nationally-representative survey of 2,032 Americans, which was conducted in July.

Administration September 23, 2013

Investors Seek Protection from Loss

September 23, 2013 (PLANSPONSOR.com) – A recent study found individuals with $200,000 or more in investable assets said market volatility has motivated a desire for a balanced investment approach.
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According to the “Allianz Life 2013 Investor Market Perceptions Study,” from the Allianz Life Insurance Company of North America, the majority of Americans ages 25 and older with more than $200,000 in investable assets are seeking protection from losses as they accumulate assets for retirement. Almost all (95%) respondents would like a financial product with no potential loss, or at least some level of protection from loss rather than one with unlimited potential growth but also unlimited potential loss. More than three-quarters (76%) would prefer a product that offers a balance of potential growth (up to 10%) with a level of protection that shelters them from up to 10% of losses.

Despite a gain of more than 1,000 points in the S&P 500 Index between March 2009 and August 2013, investors are hesitant to put money at market risk. Nearly $8 trillion of investable assets still sits in cash. The study further exposed this hesitancy as more than three-quarters (79%) of respondents said they believe the market will continue to be volatile, and nearly six in 10 (59%) noted market volatility as an economic concern having an effect on their retirement outlook.

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“It’s clear that for many investors the trauma caused by the 2008 financial crisis is still being felt and is dampening their willingness to take on risk with their savings,” said Allianz Life Financial Services, LLC President Robert DeChellis, Minneapolis, Minnesota. “Although we’ve seen strong equity markets this year, volatility remains a constant concern. With fixed-income investments offering disappointing returns, there is a strong need for solutions that can provide solid upside potential but also protect against some of the downside risk that is keeping people from participating in the market.”

As they relate to retirement, beliefs that market volatility will continue were consistent across age ranges with at least three-quarters of Generation X/Generation Y (ages 25 to 44, 82%), Baby Boomers (ages 45 to 68, 80%), and older investors (ages 69 and older, 75%) surveyed sharing that opinion. In addition to fears about equity markets, the survey also found these investors are unhappy with returns from less-volatile investments. More than six in 10 (62%) investors said they are challenged to find sufficient yield and/or return in today’s low interest rate environment.

More than one-third of respondents (38%) said market volatility was preventing them from investing their idle cash. Wealthy investors indicated they want to put their money to work with a product that offers a balance of protection and growth.

When asked what they would do with $20,000 in idle cash today, more than six in 10 (63%) said they would invest today in a product with a balance of protection from loss and growth potential. This is three times the number who said they would invest today in a product with high growth potential (20%) or wait for the market to stabilize before investing (11%). This echoes their top priority for retirement planning, as 84% agreed with the statement “you should always have some kind of protection from loss, even if it reduces your potential gains.”

In addition, when asked which financial product was more attractive—one with a 4% return that is guaranteed not to lose value or one with an 8% return, but with the possibility of losing value due to market downturns—70% of respondents chose the 4% product with guarantees. This response rose to 72% for those that indicated they work with a financial professional.

“Although consumers are still nervous about the market, they also want to move idle cash off the sidelines, provided they have some form of safety net. A retirement product offering a balanced approach seems to be the preferred course of action for the current market environment,” said DeChellis.

The study was conducted by Ipsos via their online iSay/Ampario Panel from July 24 to July 29, 2013, with 1,012 panel respondents age 25 or older, possessing investable assets of $200,000 or more, and was commissioned by Allianz Life Insurance Company of North America.

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