New Perspectives On Longevity

How investors are recalculating their retirement and income timelines

by Mike Downing

When the pandemic turned the world upside down in March of 2020, many Americans found themselves in difficult positions, not only with increased stress around their health and the health of their loved ones, but also with new stressors on their financial well-being and their retirement savings strategies. As the world adapted to its new normal and headed toward recovery, people began adjusting their retirement plans accordingly.

During this time, newfound financial fears emerged, with more than half (55%) of American adults expressing worry that they would outlive their retirement savings, according to 2022 data from Athene. The same survey also revealed that throughout the pandemic, 41% of Americans saved less money or took an early withdrawal from their retirement savings to make ends meet in uncertain financial times, further emphasizing the need Americans had for financial advice in the complicated environment.

As the tricky financial situations created by the pandemic continue to unfold, with a potential recession looming behind rising interest rates, the time for financial professionals to guide their clients along the roadmap of their respective retirement journeys is now. Here are three tips financial professionals can offer to their clients to put them on the path to retirement readiness in a post-pandemic world.

Emphasize the Importance of “Now”

The economic climate created by the pandemic, paired with the market volatility seen this year, may tempt clients to hold off on making major financial decisions or taking actionable steps toward their retirement savings plan, leaving them in a holding pattern and unsure of where to turn on their retirement journey. With many clients looking for safety, security and returns, now is the opportune time to educate your clients about all of their retirement options, including the ones that still offer safe growth opportunities in volatile market environments. This is where fixed indexed annuities come into the picture.

A fixed indexed annuity is an insurance product designed for long-term retirement savings that can create a guaranteed income stream or “retirement paycheck” to supplement clients’ other income sources, such as Social Security, pensions, 401(k)/IRAs and personal assets. Plus, they have the potential to grow clients’ income over time, while protecting any gains from loss due to market downturns, making it a smart choice for clients to consider amid the market volatility created by the pandemic.

It is also important to remind clients of all ages the value of forward planning, especially when emotions are high during turbulent times. Although younger investors have the added advantage of time on their side and have the ability to weather the storm of market fluctuation ahead of their desired retirement date, they too should be thinking ahead and playing the long game with their retirement savings strategy and utilizing products like annuities to do so. In fact, the aforementioned research from Athene also revealed that younger savers, particularly those in the 30 to 44-year range, are the most open to purchasing or considering an annuity, with more than half (55%) indicating their interest. Of that 55%, nearly one-third (27%) said that a recommendation from a financial professional or other trusted source would make them more likely to purchase an annuity, further illustrating the need to educate clients about the benefits of long-term retirement savings vehicles. As your clients start thinking about weathering the economic storm of the current environment, it’s also crucial for them to determine what their best life looks like in retirement.

Help Clients See Their Retirement Lifestyle Ahead of Time

Your clients would not buy a new car without taking it for a spin first, so why should they do the same with their anticipated lifestyle in retirement? In a post-pandemic world with rising costs from inflation causing many to be concerned that they will outlive their retirement savings, one way to ensure your clients feel comfortable with their income in retirement is to encourage them to live their lives as if they are already retired, while still living within their means.

Despite inflation-induced consumer goods costs increases, the spending habits that clients may have adopted in 2020 can be helpful for them in this new stage of life. Consider encouraging your clients to look at their larger but necessary expense items like housing, car payments, transportation, and healthcare. If there are changes your clients can see themselves making in retirement that they can realistically make early, like downsizing to a townhouse or becoming a one-car household, encourage them to implement them, where applicable. They will not only save money that they can put towards their retirement savings strategy, but ultimately, they will feel more prepared for a happier and more satisfying retirement. In thinking about their spending, remind clients what their retirement spending habits might look like and try to replicate them as closely as possible to ensure financial success. Consider savings vehicles that are best suited for their individual spending habits.

Underscore the Value of Guaranteed Income

Guaranteed retirement income is an invaluable resource for clients in retirement and can come from several sources, like Social Security, pensions and annuities, and can provide a “paycheck” that helps your clients cover basic living expenses, while also funding other goals like travel or home renovations. In fact, Athene’s research revealed that guaranteed income was the feature that American adults valued most in a retirement savings vehicle, with nearly two-thirds (64%) sharing that it was the most important. With income they can count on for life, clients will be less concerned about running out of money and outliving their savings in the ups and downs of the market post-pandemic.

Certain annuity products like fixed indexed annuities (FIAs) are designed to meet varying client needs and can be a valuable addition to retirement plans, allowing clients to feel more confident about their financial futures and be better prepared for general life and financial uncertainties. In post-pandemic volatile markets, products like FIAs may be ideal for clients if they want to create a guaranteed retirement paycheck and pursue growth with protection from market downturns. With market volatility expected to continue into 2023 and with higher inflation rates than in many years, encouraging your clients to build sources of guaranteed income into their retirement plans can bridge savings gaps and set them up for the retirement they have always dreamed of. Especially for those who may be considering a lengthy retirement or retiring early, having a steady income flow can help them feel more comfortable and confident in their financial future and ready to seize any opportunities that may come their way.

Bottom Line

Setting your clients up for a happy retirement, especially against the backdrop of recession fears, is a challenging but worthwhile task for financial professionals. Emphasize the importance of getting ahead on retirement planning, the benefit of clients living the life they want to lead in retirement before actually retiring, the value of guaranteed income and to begin the conversation and set your clients up for success. Whether your clients are starting out their careers or are moments away from their retirement, this advice can help them better understand their options and the steps they can take to secure a financially happy and healthy retirement, regardless of the economic climate.