LANSING, Mich.--(BUSINESS WIRE)--A new nationwide study released today, The Language of Retirement 2017: Advisor and Consumer Attitudes Toward Securing Income in Retirement, reveals most Americans favor financial strategies that offer guaranteed lifetime income1, yet they are largely unaware that annuities can provide this feature. While 75 percent of all consumers surveyed said they were familiar with annuities, less than half (46 percent) understood an annuity can provide lifetime income.
The study, conducted jointly by Jackson National Life Insurance Company® (Jackson®) and the Insured Retirement Institute (IRI), a leading trade association for the retirement income industry, found more than 80 percent of advisors say that guaranteed lifetime income product features have had a positive impact for their clients, and one-third say it is the most impactful feature of annuities. Further, a whopping 90 percent of all consumers who responded, and 95 percent of those 35 to 44 years old, are very or somewhat interested in receiving lifetime income.
Despite the generally positive perceptions of the benefits of guaranteed lifetime income and the fact that 63 percent of advisors recommend annuities to their clients, only one in four respondents age 45 and up plan to purchase an annuity.
“This disconnect is devastating to American savers and the advisors who are trying to serve the best interests of their clients,” said Barry Stowe, chairman and chief executive officer of the North American Business Unit of Prudential plc, Jackson’s parent company. “Retirees need guarantees to protect their lifetime income and our research proves people want this benefit. It’s our job to educate Americans and ensure they know annuities are designed to prevent consumers from outliving their income so they can live the retirement they want.”
More than half of the financial professionals surveyed believe at least some of their clients who do not own annuities will run out of money during retirement. More strikingly, the study also found more than half of advisors had clients who managed to completely exhaust their financial resources — nearly one-third of the advisors have had this happen to three or more clients. The primary factors cited by the advisors for this were overspending and health care costs.
While annuities can help solve the prospect of diminishing savings, many advisors indicated there are specific challenges that limit the use of annuities. Of advisors who responded, 61 percent believe negative client perceptions of annuities present a barrier, and almost half of advisors say their clients believe annuities are too expensive. Yet when advisors described features of annuities in isolation — without referring to the products by name — consumers expressed strong interest.
“It’s more critical than ever that our industry overcomes the existing bias toward annuities, simplifies the language used to describe them and increases the overall understanding of the power of a well-structured modern annuity so Americans will be more receptive to using them to reach their financial goals,” said Emilio Pardo, chief marketing and communications officer for Jackson.
Additional key highlights of the study include:
- Younger consumers express greater interest in the income features annuities provide compared to older respondents;
- Eight in 10 consumers say they do not believe Social Security alone will provide them with sufficient income in retirement;
- Only 21 percent of consumers expect a pension to provide them with significant retirement income;
- Four in 10 consumers believe their personal retirement savings will be their most significant source of retirement income; and
- Two-thirds of consumers believe it is very or somewhat likely that their retirement savings will be significantly affected by a health event.
Cathy Weatherford, president and chief executive officer of IRI, said the study indicates there is a significant opportunity to educate all Americans on building a holistic retirement plan.
“This study is a critical step toward understanding how future generations plan to save for retirement,” she said. “It is particularly alarming that the study found half of consumers plan to regularly withdraw money from their retirement savings to cover basic and discretionary spending, an approach that carries a high risk of depleting assets, especially among those who live longer.”
The Language of Retirement 2017: Advisor and Consumer Attitudes Toward Securing Income in Retirement surveyed both financial professionals and consumers on Americans’ preparedness for retirement, their familiarity with and their attitude toward various financial products and the financial strategies they are most likely to use. The online study, which was conducted between March 13-16, 2017, surveyed 1,000 consumers age 25 or older with at least $10,000 in retirement savings, an additional 300 consumers who already have an annuity or work with a financial professional, and 400 financial professionals who had been active financial planners for two or more years at the time of the study. For the full detailed results of the study visit https://www.myirionline.org/docs/default-source/research/iri_whitepaper_final_singlepg.pdf?sfvrsn=2.
About Jackson National Life Insurance Company
Jackson is a leading provider of retirement products for industry professionals and their clients. The company offers a diverse range of products including variable, fixed and fixed index annuities designed for tax-efficient accumulation and distribution of retirement income for retail customers, and fixed income products for institutional investors. Jackson subsidiaries and affiliates provide specialized asset management and retail brokerage services. With $249.8 billion in IFRS assets*, Jackson prides itself on product innovation, sound corporate risk management practices and strategic technology initiatives. Focused on thought leadership and education, the company develops proprietary research, industry insights and financial representative training on retirement planning and alternative investment strategies. Jackson is also dedicated to corporate social responsibility and supports charities focused on helping children and seniors in the communities where its employees live and work. For more information, visit www.jackson.com.
Jackson is the marketing name for Jackson National Life Insurance Company (Home Office: Lansing, Michigan) and Jackson National Life Insurance Company of New York® (Home Office: Purchase, New York). Jackson National Life Distributors LLC.
*Jackson has $249.8 billion in total IFRS assets and $236.4 billion in IFRS policy liabilities set aside to pay primarily future policy owner benefits (as of June 30, 2017). International Financial Reporting Standards (IFRS) is a principles-based set of international accounting standards for reporting financial information. IFRS is issued by the International Accounting Standards Board in an effort to increase global comparability of financial statements and results. IFRS is used by Jackson's parent company.
Jackson National Life Insurance Company is an indirect subsidiary of Prudential plc, a company incorporated in England and Wales. Prudential plc and its affiliated companies constitute one of the world's leading financial services groups. It provides insurance and financial services through its subsidiaries and affiliates throughout the world. It has been in existence for over 165 years and has $824.7 billion in assets under management (as of June 30, 2017). Prudential plc is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America.
About the Insured Retirement Institute
The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of 40 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at www.irionline.org.
The information in this press release is our summation of a study conducted on behalf of the Insured Retirement Institute and Jackson National Life Insurance Company, 2017.
A variable annuity is a long-term, tax-deferred investment designed for retirement, involves investment risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59 ½.
The latest income date allowed is age 95, which is the required age to annuitize or to take a lump sum. Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity.
Variable annuities are issued by Jackson National Life Insurance Company® (Home Office: Lansing, Michigan) and in New York by Jackson National Life Insurance Company of New York® (Home Office: Purchase, New York). Variable annuities are distributed by Jackson National Life Distributors LLC, member FINRA. These products have limitations and restrictions. Jackson issues other variable annuities with similar features, benefits, limitations and charges. Discuss them with your representative or contact Jackson for more information.
1 Guarantees are backed by the claims-paying ability of the issuing insurance company. Guaranteed lifetime income is available through two different options, annuitization and optional living benefits. Please note that not all optional living benefits offer guaranteed lifetime income, are not available on all annuity products and may have an additional charge.