New Study Highlights Baby Boomers Need for Retirement Income

Published May 4, 2018
A recent study by the Insurance Retirement Institute (IRI) shows that baby boomers are not adequately prepared for retirement. Retirement income from an annuity can help baby boomers retire with the peace of mind that they will not outlive their retirement savings.
  • In a recent study by the Insurance Retirement Institute (IRI), only 25 percent of baby boomers reported being confident their savings will last throughout retirement
  • The same study found that 70% of baby boomers want guaranteed, lifetime income, though only 14% of baby boomers plan on purchasing an annuity
  • Blueprint Income’s annuity quote tool can help boost confidence among baby boomers by finding a guaranteed, lifetime income level that is best for them

A recent study by the Insurance Retirement Institute (IRI) highlights growing concern among baby boomers that they may outlive their retirement savings. The report comes after years of research that indicate baby boomers are entering retirement unprepared. We feel that greater utilization of annuities can increase baby boomer confidence in their retirement preparedness and boost retirement outcomes for retirees.   

Baby Boomers Have Poor Retirement Preparedness

The annual study released by the Insured Retirement Institute shows that “42 percent of baby boomers have no retirement savings.” This saving rate is significantly worse than the broader adult population, where nearly 30% of adults admitted to not having some form of retirement savings or pension. This widespread lack of savings and retirement preparedness by baby boomers was also highlighted in a 2015 Government Accountability Office report, titled Most Households Approaching Retirement Have Low Savings. As baby boomers enter retirement, a lack of adequate retirement savings and insufficient retirement income leaves them financially vulnerable.

Baby boomers intuitively understand what the above data demonstrates. In a recent a recent IRI study only 25 percent of baby boomers expressed confidence that their savings will last throughout retirement. Put another way, nearly 3-in-4 people nearing retirement fear that they will outlive their retirement savings. Retirees in the survey felt that retirement income can play a large role in boosting their confidence that their retirement savings will last throughout retirement, something empirically confirmed by economists (read more here).

Annuities and Retirement Income Can Increase Retirement Preparedness

A pure annuity offers a reliable way to secure a steady stream of income during retirement, reducing the risk of outliving one’s assets. The promise of a guaranteed, lifetime income stream can help bolster retirement preparedness, but still annuities remain underutilized. This year’s IRI study found that “seven in 10 boomers say it is very important for retirement income to be guaranteed for life, yet only 14 percent plan to purchase an annuity with a portion of their 401(k) or IRA and only 3 percent have done it.” This creates an alarming dichotomy, where baby boomers want lifetime income from an annuity, yet few people plan to buy one.

This dichotomy is surprising given IRI’s findings that “monthly guaranteed income is the most important single trait boomers look for in a retirement investment.” An annuity, which provides monthly guaranteed income, should then be considered an attractive investment option for retirees! One factor contributing to the lack of annuity usage is that they’re rarely offered in defined contribution plans. The IRI survey found that 80% of respondents wish to use a portion of their of 401(k) as guaranteed retirement income. But, data from Willis Towers Watson shows that only 23% of plans have adopted a lifetime income solution to their retirement plan.  

Recent changes to the tax code that created the QLAC and new proposed legislation may lead to greater annuity adoption in employer sponsored 401(k) plans, thus making it easier for baby boomers to convert some of their retirement savings into annuity income. These actions may help increase retirement preparedness in the long-run, especially for baby boomers who are currently in the workforce.

Why an Annuity From Blueprint Income Matters

Many baby boomers who have an IRA, or are thinking about rolling their 401(k) into one, use a financial advisor, which the IRI study found is correlated with better retirement outcomes and greater utilization of annuities. However, not every financial advisor is a fiduciary, meaning that they aren’t legally required to operate in your best interest. When it comes to complex investments such as an annuity, knowing that your advisor is a fiduciary is critically important to making sure that you get the right product for you and your family. Blueprint Income is a fiduciary, meaning it is our legal and ethical responsibility and purpose to act in your best interest. (Note that we are not required to act as fiduciary when working with non-qualified funds, but we choose to do so.)

In addition to acting in your best interest, Blueprint Income makes purchasing retirement income simple and easy to do via our annuity quote tool. Because an annuity is only as good as its guarantee, you’ll only find insurers rated A and above by A.M. Best on our site.

IRI’s data highlights the important role that annuity income can play in improving the retirement preparedness and financial confidence of baby boomers. Still, many baby boomers may find it hard to purchase an annuity that is right for them. Blueprint Income makes it easy for baby boomers to convert retirement savings into guaranteed lifetime income.

To see what an annuity could look like for you, run a free, personalized quote on our website:

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Any questions or concerns? Our team is always available to help you out. Whether it’s explaining the basics of annuities or running a detailed retirement spending analysis, our actuaries and CFAs are accessible to all Blueprint Income customers.

 

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Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.