Boomers seek less volatile portfolios

by Ed McCarthy, CFP for he May 01, 2012 issue of Senior Market Advisor

The Boomer Issue

bThe bear market of 2008-09 hit pre-retirees’ and retirees’ portfolios hard. Although the broad equity market indices have since recovered, older investors remain cautious about risk-taking, according to Prudential’s survey, “Changing Attitudes About Retirement Income: Tracking the Challenges of Investors in the Retirement Red Zone® (2006 to 2011).” The results highlight a post-bear market shift to more conservative attitudes among investors close to retirement or recently retired. Among the findings:

The majority of investors say they are more cautious now than ever before: 68%

47% hesitate to invest more in the market despite future growth opportunities.

In planning and managing their retirement assets, many show a more conservative mind- set—expecting their investment approach to be “bearish” over the next five years: 48% Close to a third don’t know what to expect: 30%

In 2006, investing too aggressively or too conservatively was seen as equally risky. Today, 60% believe being too aggressive is the greater risk.

In 2009, 68% believed this to be the case, revealing how significantly the volatility of the market impacts investor perceptions.

Stability is good

Older investors are also expressing a desire for more investment alternatives to stabilize or guarantee retirement income. “The survey shows increased awareness of guaranteed retirement income products, and strong interest in them,” says Kimberly Supersano, chief marketing officer, Prudential Annuities in an email response. “More than eight in 10 (82 percent) see them as a valuable addition to their portfolio; with more than half (52 percent) saying that having stable income in retirement is a leading concern.” The survey further reports that:

• Compared to 2006, investors are more aware of guaranteed retirement income products—specifically, products that can guarantee lifetime income from retirement savings (up 6 percentage points from 2006), or guarantee to lock in market gains (up 8 percentage points) or provide a minimum annual growth rate (an 11 percentage point gain) on money intended for use as lifetime income.

• Three-quarters of Retirement Red Zone investors find these types of guarantees appealing.

• Eighty-two percent believe an investment product with guaranteed features would be a perfect addition or “nice to have” as part of their portfolio, which is an increase of 6 percentage points from 2009.

• The majority of survey respondents indicated that if they had a retirement investment product with guaranteed income, they would likely stay in the stock market even if they were to experience short-term losses (84 percent), and would stay invested for the longer-term horizon (76 percent). Both of these measures are higher than first reported in 2006 (10 percentage points and 4 percentage points, respectively).

Working with advisors

Another finding has positive marketing implications for financial advisors. When asked specifically about the help they need in retirement income planning, half the respondents say they need guidance on the financial issues they should be thinking about and the solutions that may be best for their situation (48 percent). About a third is actively seeking help and wants a one-on-one discussion about the options for generating retirement income (31 percent).

“While there are, in fact, more do-it-yourselfers today compared to two years ago (32 percent versus 23 percent), the majority of investors (68 percent) rely on financial professionals to lead or help with their investment decisions,” says Supersano. “For financial advisors, the survey underscores the value investors place on getting good advice.”

Prudential’s survey report, Changing Attitudes About Retirement Income: Tracking the Challenges of Investors in the Retirement Red Zone® (2006 to 2011) uncovered these facts about retirees and pre-retirees:



“For financial advisors, the survey underscores the value investors place on getting good advice.” Kimberly Supersano, Prudential Annuities




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