Sustaining happiness during retirement

Given the general unpreparedness of many individuals for retirement, people risk an income shortfall, or even old-age poverty

In the United States, for example, one in every five respondents to a recent survey conducted by the Board of Governors of the Federal Reserve System reported having no savings or defined benefits pension.

THE INDUSTRY NEEDS TO DEVELOP PRODUCTS THAT CAN HELP DECUMULATE ASSETS

However, the situation also presents an opportunity for the financial industry. In the US alone it has been estimated that 10,000 baby boomers will retire every day for the next 19 years.

FINANCIAL INDUSTRY CHALLENGED

This wave of future retirees will be looking for financial peace of mind that can only come from solid solutions and considered advice. What this ideal product will be will differ from one situation to another because individuals arrive at retirement with vastly different situations, expectations and resources. High-net-worth individuals will be seeking solutions that can generate the returns that they need in order to maintain their expected lifestyle into their later years. Middle-income retirees will be seeking solutions that will assist them in their remaining accumulation years and stretch out their nest egg for as long as possible throughout their retirement years.

In many cases, the ideal product is not likely to be a traditional insurance one, such as an annuity, or asset management product, such as a target date fund, but rather a hybrid that addresses critical points throughout the life cycle. Darren McShane of the Mandatory Provident Fund Schemes Authority (MPFA) in Hong Kong is particularly excited about hybrid products in the UK and Netherlands, which provide longevity protection through pooling.

Decumulation is undoubtedly a far more complex topic than accumulation (and the industry may have even gotten that simpler phase dramatically wrong, according to Rob Arnott). Yet, for the sake of future retirees and for its own future, the industry will need to develop products that can help them decumulate their assets with confidence.

Future retirees will need to be assured they can receive good, trustworthy advice about products that are flexible enough to meet their individual needs, given the market conditions. If the industry comes up with such innovative, visionary products to sustain them in their happiness in retirement, then it will indeed be a magnificent feat.

Sustaining happiness during retirement

Given the general unpreparedness of many individuals for retirement, people risk an income shortfall, or even old-age poverty

Sustaining happiness during retirement

Given the general unpreparedness of many individuals for retirement, people risk an income shortfall, or even old-age poverty

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