2-minute article

Help your clients overcome behavioral biases about annuities

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. Rising life expectancies can pose another risk.

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

Longer lifespans may impact retirement savings

According to the Secure Retirement Institute, 25% of 65-year-old men will live to age 89 whereas 25 percent of 65-year-old women will live to age 92. As life expectancy rises many people wonder if they will have enough money to cover those years. About 57 percent of Americans who aren’t yet claiming Social Security retirement benefits worry about outliving their assets.

On the other hand, a retirement plan including an annuity can help people feel more financially secure. These poll results confirm that, as 74 percent of respondents with an annuity feel confident they will live comfortably in retirement.

Investigating puzzling consumer behavior

The fact that many consumers don’t purchase annuities when it is in their interest to do so is called the “annuity puzzle.” Athene realized this puzzle was interfering with consumers’ ability to plan for a financially secure retirement, so we set out to find out why.

Athene commissioned a review of behavioral biases from two experts in judgment and decision making at UCLA Anderson School of Management regarding this phenomenon. Their review identified 10 biases, ranging from fear or mortality to lack of financial confidence, that keeps some consumers 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 there are steps you can take to steer your clients toward sound financial decisions. Each behavioral finance bias these experts identified is paired with a solution that could help them overcome the ones getting in the way.

Being aware of behavioral finance biases that could come into play during the retirement planning can help put you and your clients on the path toward making smarter financial decisions together.

This information is brought to you by Athene — where innovative annuity solutions are powered by unconventional thinking.