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Help your clients overcome behavioral biases about annuities

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A joint Kiplinger-Athene poll found that 75 percent of respondents would like to have more guaranteed income in retirement than they have or expect to have, which a majority (57 percent) said would help ease their minds about outliving their savings.

Meanwhile, the type of guaranteed income annuities can provide is more important than ever as market volatility and inflation take a toll on some retirement savings accounts. And yet, there are factors standing in the way between annuity purchases and the financial peace of mind they can provide.

Did you know?
74% of poll respondents who own an annuity feel confident they’ll live comfortably in retirement.

Inflation whittles away retirement savings

Record-high inflation can have an eye-opening impact on a retiree’s spending power. Imagine clients putting away $100 for a rainy day only to find later that it now has the buying power of $60.

That’s how inflation whittles away at retirement income. In 1982, $100 had the spending power equivalent to just under $32 in 2022 — a $68 reduction. With longer retirements, future inflation rates could shrink how far retirees’ dollars stretch as they age.

Not only can inflation devalue retirement savings and income, but higher prices can affect how much retirement savers can afford to put away for their future. As Americans look for ways to cut back their spending, 50 percent surveyed by U.S. News and World Report paused their retirement savings to keep up with inflation. Another 41 percent of respondents stopped contributing to their 401(k) or other retirement savings accounts altogether because of the higher cost of living. Depending on the makeup of a retirement portfolio and the effect of market forces over time, cutting back now could potentially mean less retirement income later.

Rising life expectancies pose another risk 

A common retirement concern for people is outliving their assets, or longevity risk, but you may find more women than men concerned about it. Research shows about 44 percent of pre-retired women have major concerns about outliving their assets compared to 29 percent of pre-retired men.

But a retirement plan including an annuity could help people feel more financially secure. Poll results reveal that 74 percent of respondents with an annuity feel confident they will live comfortably in retirement. What’s interesting? While many people are concerned about outliving their retirement savings, some people may not be calculating how long their retirement assets will last.

Investigating puzzling consumer behavior

Why don’t more people purchase an annuity if it can help them retire with confidence? This phenomenon is called the “annuity puzzle.” We realized this puzzling trend interferes with some people’s ability to plan for a financially secure retirement, and we wanted to know what’s behind the resistance.

To find answers, Athene commissioned a review of behavioral biases from two experts in judgment and decision making at the UCLA Anderson School of Management to solve the puzzle. Their review identified 10 biases, ranging from fear of mortality to lack of financial confidence, that keep some people from purchasing annuities.

Experts identified 10 behavioral biases interfering with annuity purchases. Which ones do your clients bring to retirement planning conversations?

What can you do?

The good news is you can help steer clients toward sound financial decisions. Each behavioral finance bias is paired with a solution that could help overcome biases getting in the way. Discover more expert insights from this exclusive research and steps to take when you:

Being aware of behavioral finance biases that may come into play during retirement planning conversations gives you valuable insights that could help you and your clients make smarter financial decisions together.

Insights on Athene Connect. Tips, tools and resources to grow your business by helping clients retire with confidence.