Retirees and pre-retirees are trying to figure out how to confront inflation and market volatility, and that presents advisors with an opportunity to educate, says a new study by Jackson National Life Insurance Company.
The Lansing, Mich.-based firm released a study this month asking retirees, pre-retirees and retirement professionals about the strategies they use to deal with these issues. Aside from the broad support investors show for dividend-paying stocks and rebalancing, the study found they lacked the know-how to make wise decisions about retirement. They listed savings accounts as their third most popular strategy in ensuring market volatility protection.
The new study complements an earlier one by Jackson National that found the main reason many retirees and pre-retirees invested in an annuity is because their advisor told them to.
“We believe there’s an opportunity for financial advisors to provide guidance on more effective strategies for protecting against volatility,” said Glen Franklin, director of research and customer insights at Jackson National.
Many people in the study were unfamiliar with products designed to more effectively deal with inflation, such as registered index-linked annuities (RILAs). This vehicle provides a series of indices to invest in and allows an investor to cap the growth in the underlying portfolio in exchange for a buffer against downturns, Franklin said.
“We have an opportunity where we can do a better job of exploring the benefit of that product,” he said. “It’s relatively new in the industry, but it’s a way to tap into options and hedging as risk-mitigation strategies.”
Those who already had a pension were more likely to purchase an annuity, the survey found.
Previous studies suggested people were on target to retire with $250,000 in financial assets. But with inflation taken into account in the new study, Jackson National lowered the asset level to $200,000, Franklin said.
An earlier study also found that about half of pre-retirees anticipate working in retirement while only 2% of those who retired were actually working.
Jackson’s studies have gone beyond just the investment strategies of those retired or getting ready to retire. The firm has also studied a person’s state of mind and emotional comfort.
“In retirement our sense of purpose comes from within, [and] it’s not being imposed on us by social or practical expectations,” Franklin said. “It also ties into arresting cognitive decline when you have purpose for your day, and structuring it can help you from a physical health standpoint.”
The firm said it wants to modify the way its financial advisors relate to their clients and look beyond the investment risk profile to this emotional profile and use it to see how advisors can best serve their clients, Franklin said.
Jackson’s new study surveyed 250 retirees and pre-retirees along with 150 financial professionals. The firm categorizes pre-retirees as those between the ages of 50 and 75. Retirees are those between the ages of 60 and 80.