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Global Report

Retirement Income Planning
in a World of Greater Risk

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The emotional and financial upheaval caused by the Covid pandemic and its aftermath, as well as the rising uncertainty caused by world events, have changed the way those entering and in retirement think about their post-work years.

Those developments, and the challenges they present, also have changed the way financial advisors approach serving the retirement income planning needs of their clients. To assess those changes and to understand the strategies, services and products currently being employed to serve clients approaching and in retirement, and Informa Engage recently conducted an in-depth study of advisors on behalf of Allianz Life Insurance Company of North America (Allianz).

This report presents the highlights of that research, the implications, and offers suggestions regarding the ways in which advisors can meet the retirement income needs of clients in today’s unsettled environment.

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Retirement Income Planning in a World of Greater Risk

Wednesday, July 13, 2022 | 2:00PM ET

Corey Walther
President, Allianz Life Financial Services, LLC Member FINRA

Allianz Life Insurance Company of North America

Mark Bruno
Managing Director, Wealth Management at Informa

By registering for this event you acknowledge that you are a licensed financial professional.

Takeaways and suggestions:

The comprehensive data in this report offers a wide-ranging view of the retirement-planning issues facing advisors and their clients. With most advised clients approaching or in retirement, the results touch on points central to most advisors’ business strategy.

Based on the survey data, the following are some takeaways framed as suggestions. They are designed to help advisors develop successful retirement income plans for their clients.

Takeaway & Suggestion

Focus more on risk, less on performance

While clients may not always articulate their concerns, survey results indicate clients probably are somewhat more anxious than advisors about the risks they face in retirement — inflation, medical expenses, long-term care and longevity chief among them.

Couple their concerns with the current unsettled economic and geopolitical environment and it’s likely that discussions and recommendations connected with risk mitigation and risk reduction will resonate with clients more than discussions about performance. A desire for stability, safety and protection are likely to be recurrent themes among clients in coming years.

Over half of investors feel that risk management is very important
Most investors expect the average initial withdrawal rate to stay the same or increase five years from now
Takeaway & Suggestion

Specificity about retirement income/expenses can reduce anxiety

Advisors and clients spend so many years focused on accumulating assets they often tend to devote less attention to the specifics of decumulation.

The survey’s evidence of advisor and client plans for relatively high withdrawal rates indicates that clients may need more advice from advisors in understanding and planning for the retirement income factors they can control in order to make their assets last. These include spending/withdrawal trade-offs, saving more during remaining working years, possibly delaying retirement and/or receiving Social Security benefits, and perhaps working part-time in retirement.

"If you use just 3% as the figure for inflation, which is very conservative given what’s happening today, on a compound basis you will need 40% more at age 85 than at 70."

Harold A. Schwartz Chief Executive Officer, Chief Investment Officer DMK Advisor Group Lutz, Florida

Takeaway & Suggestion

Approach retirement income/expenses differently

During their working years, most people tend to spend what they earn, minus what they save and invest and allocate to charity. In retirement, sources of income vary, often being drawdowns from various accounts, Social Security, possibly a pension and sometimes work.

Expenses, at least at the start of retirement when discretionary spending may be high, often may be difficult to calculate since many people do not have a solid idea of what they spend. Using a technique that behavioral economists have developed, advisors may be able to assist and guide clients in getting a better handle on retirement expenses and income by discussing those categories in terms of buckets or asset/liability matching.

Expenses, for example, may be grouped in fixed and variable categories. Clients are likely to feel more secure if they understand they can cut back on variable expenses if investment returns are lower than expected. Similar security can come from knowing that fixed expenses, which are more like liabilities, are covered by guaranteed income sources such as Social Security benefits and annuity payouts.

Having a firm idea of income and expenses in retirement is very important to most investors

"Somewhere between 50% and 75% of clients can’t give me an exact figure on how much they spend each month, or on what."

Michael Pennica, Founder and President, Pennica Financial Group, Colorado Springs, Colorado

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Takeaway & Suggestion

Tackle the annuity puzzle a new way

Many people think of the guaranteed lifetime income payments they receive from an annuity as a personal pension — and most people view defined benefit pensions as being very desirable and want one.

At the same time, and as the survey data confirm, most respondents report a lukewarm level of client interest in guaranteed lifetime income products. By focusing on the insurance and guaranteed income properties of annuities, advisors can help clients feel more secure about retirement and enable them to spend more in retirement than they might otherwise. Without delving too far into the insurance weeds, advisors can explain that because insurers pool the longevity risk of a large customer base, annuity buyers who live longer receive income they likely would not otherwise be able to generate from their assets.

"Even though most of my clients have more than enough money to meet their future needs, they are worried about inflation. Families and health are their other big worries."

Cary Carbonaro, Independent Advisor and CFP Board Ambassador, Winter Garden, Florida

Takeaway & Suggestion

Decumulation requires a broader approach

Advisors often continue to employ the asset management strategies they used in a client’s accumulation phase when the client moves to decumulation.

When asked about the importance of factors in developing a retirement plan for clients, 44% of respondents said that having an inflation plan in place was only somewhat important or not important, followed by estate planning and legacy issues (42%), healthcare and medical care risk (42%), and Social Security claiming strategies aimed at increasing retirement income (41%). Clearly, with clients concerned about risk and income, a greater focus on these and other services, especially in the area of liability management, are what is needed to provide true wealth management as clients move into their decumulation phase.

The most important factors in developing a retirement plan for clients


Retirement Income Planning in a World of Greater Risk

This white paper will present the highlights of that research, discuss their implications, and offer suggestions regarding the ways in which advisors can meet the retirement income needs of clients in today’s unsettled environment.

Allianz Life Insurance Company of North America does not offer financial planning services.

Guarantees are backed by the financial strength and claims-paying ability of issuing insurance company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.

Products are issued by Allianz Life Insurance Company of North America. Variable products are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.542.5427