Critical Gaps in Retirement Income Planning Revealed by LIMRA Research

New research from LIMRA highlights a critical gap in retirement planning, underscoring that while many Americans nearing retirement have considered future income streams, few possess an updated strategy for financial stability. The study contrasts the expectations of pre-retirees with the solutions provided by the financial industry and advisors, revealing a significant disconnect.

The Retirement Income Readiness Report draws on an April survey featuring 486 pre-retirees and 804 retirees aged 45 and older. Although 59% of pre-retirees and 63% of retirees feel well-prepared for retirement, those who receive financial advice report significantly higher confidence levels. Among pre-retirees consulting financial advisors, 77% feel prepared, compared to 47% without advisory services. Yet, despite the benefits, only 40% of pre-retirees work with financial advisors, with just 8% from the least-prepared demographic seeking advice.

According to Bryan Hodgens, LIMRA’s senior vice president, consumers are pinpointing where the industry can improve support—namely in providing guaranteed lifetime income and addressing fears of outliving savings. Jason Fichtner, executive director of the LIMRA Retirement Income Institute, stresses the need for industry professionals and policymakers to deliver reliable solutions to meet challenges like inflation, unexpected health costs, and longevity risk.

The research indicates a preference for retirement income sources with protective elements such as Social Security, pensions, or annuities. However, only 25% of pre-retirees believe these will sufficiently cover basic expenses, compared to 52% of current retirees. Despite the demand for guaranteed income, advisors face challenges with annuity product adoption due to paperwork, licensing, and asset management complexities, as noted by Rich Romano, CEO of FIDx.

Operational difficulties and consumer concerns about costs and liquidity impact the uptake of protected-income products. LIMRA recommends that financial advisors focus on educating clients on the critical role these products play in comprehensive retirement strategies. Michael Finke, a fellow at the LIMRA Retirement Income Institute, highlights the necessity of empowering individuals to assess their readiness and transform savings into stable retirement income effectively.