10-Question Quiz Identifies Retirees’ Money Mindset
ARLINGTON,Va., April 15, 2015—New LIMRA Secure Retirement Institute research finds thatpre-retirees and retirees fall into three categories based on their emotionalattitude to their savings.
LIMRASecure Retirement Institute asked 2000 pre-retirees and retirees (ages 50 -75with at least $100,000 in household assets) what income product features theydeemed most important. Using clusteranalysis based on their responses, the Institute was ableto identify three distinct money mindsets:
- GuaranteeSeekers – Want to know that their income won’t disappear. Have a floor of lifetime guaranteed incomeand would be interested in converting even more of their savings to a pension-likecontractual guarantee. Want to spendmoney without the day-to-day worry of how long it has to last. Want the peace of mind of a certain outcome.
- EstatePlanners –Financially savvy. Understand equitymarkets generally outperform risk-free fixed investments. Can withstand a little volatility to maximizethe potential of investments. Trust theirown investment decisions. Want to maintainpersonal control over investment decisions and to retain the flexibility toadjust income and spending as needs change over time.
- AssetProtectors – Have been saving money for a long time. Do not want to see savings account balance godown. Will live off the interest anddividends of savings, but uncomfortable invading principal. Don’t want to be poorer.
Understandinga client’s money mindset will help an advisor recommend an appropriateretirement income strategy that is ‘right’ for that person.
Thestudy found that people in each of these categories can look very similar onpaper. They often share the samedemographic profile, wealth level and lifestyle ambitions. But because theirattitudes toward money are so different, LIMRA Secure Retirement Institutefound a distinct divergence in the income solutions they prefer.
“Guarantee Seekers” willwant certainty and peace of mind and are not seeking maximum income potential,but rather a stable and predictable monthly income. According to theInstitute’s research, this segment has the highest rate of ownership fordeferred and immediate annuities (46 percent collectively). Guarantee Seekers are least likely to ownindividual stocks, mutual funds and corporate/municipal bonds.
Theresearch shows “EstatePlanners” will not be interested in converting savings to a guaranteed incomestream. Investment growth and controlare important to this segment. Accordingto LIMRA Secure Retirement Institute research, Estate Planners had the highestownership rate of individual stocks (69 percent), mutual funds (75 percent) andETFs (19 percent).
“Asset Protectors” arereluctant to take risk and want guaranteed fixed rates of return withoutputting their principal at risk. Thissegment worries about running out of money in retirement and wants to hedgeagainst unexpected future expense. Instituteresearch indicates Asset Protectors have the highest rate of ownership of CDs(44 percent). Asset Protectors were mostlikely to own other conservative assets like annuities (31 percent), governmentbonds/Treasury notes (30 percent).
“The mosteffective retirement income strategy is actually a subjective assessment as muchas it is an objective one,” said Judith Zaiken, corporate vice president anddirector LIMRA Secure Retirement Institute research. “A subjective assessmentcombined with a thorough look at the numbers can help an advisor develop a moreeffective retirement income strategy.”
What’s your MoneyMindset? Take the Quiz here!
About LIMRA Secure Retirement Institute
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LIMRA Secure Retirement Institute provides comprehensive, unbiased research and education about all aspects within the retirement industry to improve retirement readiness and promote retirement security. For more information, please visit www.secureretirementinstitute.com.