Clueless about guaranteed lifetime income
October 7, 2014 by Marlene Y. Satter
They need it, they want it, they gotta have it. But when it comes right down to it, Americans in search of guaranteed lifetime income are pretty uninformed about sources for it other than Social Security and pensions.
That’s the conclusion of research from independent data provider CANNEX and market research firm Greenwald & Associates, which found that although Americans depend on guaranteed lifetime income to get them through retirement and will need more of it as time passes, they really don’t know much about alternative sources for it.
Consumers between the ages of 55-75 with at least $100,000 of investable assets place a high value on guaranteed lifetime income sources to augment Social Security benefits. They also believe guaranteed income helps them manage spending, plan their finances and do so with peace of mind.
Forty percent of retirees, the study found, don’t tap into investments at all, but pay all their expenses from guaranteed lifetime income sources. Other retirees try to keep their discretionary spending down and count on pension plans and Social Security, rather than retirement savings, to pay for expenses. Among these retirees, guaranteed lifetime income covers 79 percent of their living expenses.
But outside of the Big Two — Social Security and pensions — people really don’t understand or know how to find other guaranteed sources of income. And while they say they highly value sources of guaranteed lifetime income, only 16 percent scored highly on a new index generated by the study that measures how attractive consumers find financial products that provide guaranteed lifetime income benefits, and how likely they might be to consider and invest in them.
To drive that point home, the study found that most consumers don’t understand the differences among various types of annuities. Only 30 percent said that they’re highly familiar with fixed annuities. When it comes to mutual funds, on the other hand, two-thirds say they’re highly familiar with them.
Women, those with less than $1 million in assets, those who count on others for investment decisions and those who remember an advisor talking to them about annuities were the most likely to be most appreciative of the value of guaranteed lifetime income.
