The Retirement Products Market for Baby Boomers and Generation X in the U.S.

Published: Oct 20, 2008 - 287 Pages

Table of Contents:

Chapter 1: Executive Summary
Scope of Report
Report Methodology
On the verge of a retirement boom
What is retirement?
Retirement as life enrichment; retirement as a new career phase
Economic outlook and its impact on retirement planning
Faith No More: 77% Lack Confidence in Economy
Table 1-1: Percentage of Adults with Little or No Confidence in Short-Term Prospects for the Economy, October 2007-April 2008 (U.S. adults)
Economic pessimism carries over to retirement outlook
Long-term lack of market confidence
Solvency outlook for Social Security, Medicare and Medicaid
Changing lifestyles of the pre-retirement market
Financial generosity may imperil Boomers’ ability to age in place
Generation X outlook and concerns differ significantly from those of older generations
The number and the specter of saving too much
Americans recognize they don’t save enough
Demographics
Introduction
Non-Hispanic white percentage increases
Gen X more likely to be college grads
Figure 1-1: Ethnicity: Baby Boomers and Generation X, 2007-2008 (percent)
Figure 1-2: Highest Level of Educational Attainment: Baby Boomers and Generation X, 2007-2008 (percent)
Baby Boomers and Gen X favor full-time employment
Both Baby Boomers and Gen X outearn adults in general
Boomers most likely to have highest household income
Figure 1-3: Individual Employment Income: Baby Boomers and Generation X, 2007-2008 (percent)
Figure 1-4: Household Income: Baby Boomers and Generation X, 2007-2008 (percent)
The Retirement Instruments Market
Overview of retirement resources
Table 1-2: U.S. Retirement Assets By Type, 1998-2007 (in trillions of dollars)
Projections of retirement resources
Figure 1-5: Projections of U.S. Retirement Assets by Type: Straight Line Projections, 2008-2012 (in billions of dollars)
Figure 1-6: Projections of U.S. Retirement Assets by Type: Adjusted for Nominal GDP as Projected by Congressional Budget Office, 2008-2012 (in billions of dollars)
Retirement resources from the individual’s perspective
All income sources
Table 1-3: Annual Income Saved During Last Year, 2008(percent)
Table 1-4: Confidence in Saving Enough to Meet Future Needs, 2008 (percent)
Current financial and retirement resources of Baby Boomers and Gen X
Financial investment products
Baby Boomers tend to have more financial products than Gen Xers
Table 1-5: Overview of Ownership of Investment Products, 2007-2008 (percent of U.S. adults)
Individual/small business retirement products
Table 1-6: IRA Ownership, 2007-2008 (percent of U.S. adults)
Self-directed IRAs
Solo 401k
Proposed legislation
SEPs and Keoghs
Figure 1-7: Keogh/Sep-Ira/Pension Ownership, 2007-2008 (percent of U.S. adults)
Annuities
Figure 1-8: Ownership of Tax-Sheltered Annuities, 2007-2008 (percent of U.S. adults)
Reverse mortgages and home equity
How reverse mortgages work
Positive outlook for reverse mortgages
Long-term care insurance
Individual LTCi
Figure 1-9: Individual LTCi Sales By Issue Age, 2007 (percent)
Group LTCi
Figure 1-10: Group LTCi Sales by Issue Age, 2007 (percent)
The LTCi purchasing decision?
Life insurance
Life insurance settlements
Inheritance
Famous “Boomer inheritances” going to elders
Focus on Employer-Sponsored Retirement Products
The employee perspective
Pensions/defined benefit plans
Cash balance plans
Defined contribution plans
401ks
Table 1-7: 401k Ownership, 2007-2008 (percent of U.S. adults)
401k fallout from 2008 financial crisis
Impact of the Pension Protection Act of 2006
Annuities surfacing as intriguing 401k option
Exchange Traded Fund (EFT) 401k platform
Collective investment funds
401k debit cards
Lifestyle and lifecycle funds
Advice is welcome!
Advice to troubled mortgage holders
Automatic enrollment
401k rollovers
403bs
457 plans

Chapter 2: Market Drivers
Scope of Report
Report methodology
On the verge of a retirement boom
What is retirement?
Retirement as life enrichment
Many anticipate earned income in “retirement”
Economic outlook and its impact on retirement planning
Faith No More: 77% Lack Confidence in Economy
Table 2-1: Percentage of Adults with Little or No Confidence in Short-Term Prospects for the Economy, October 2007-April 2008 (U.S. adults)
Economic pessimism carries over to retirement outlook
Long-term lack of market confidence
Stock market climb in long-term stall
Cautious forecasting advised
Weak housing market wiping out billions of dollars in home equity
Boomer sell-off not the problem
Uneven distribution of wealth
What the numbers tell us: 2008 real GDP growth forecasted at a meager 1.1%
Figure 2-1: U.S. Current-Dollar GDP vs. Real GDP, 2000-2008 (in trillions of dollars)
GDP price index ticked up
Figure 2-2: Percentage Changes in U.S. Current-Dollar: GDP, Real GDP and the GDP Price Index, 2002-2008
Economic future uncertain
Personal consumption slows
Figure 2-3: U.S. Current-Dollar vs. Real Personal Consumption Expenditures, 2000-2007 (in billions of dollars)
Figure 2-4: Percentage Changes in U.S. Current-Dollar vs. Real Personal Consumption Expenditures and Inflation, 2001-2008
Solvency outlook for Social Security, Medicare and Medicaid
Changing lifestyles of the pre-retirement market
Boomerang effect re-mixes generations
Career, family disasters can force even Boomers back home
Adult kids and grandchildren? boomerang, once removed
Childcare can add additional burden for Boomer grandparents
Boomer home caregivers number in millions
Financial generosity may imperil Boomers’ ability to age in place
Generation X outlook and concerns differ significantly from those of older generations
Gen X is cautious, even pessimistic
Insufficient financial resources impede retirement preparations
Blogging for dollars
The number and the specter of saving too much
The possibility Americans are undersaving . . . or oversaving
Americans recognize they don’t save enough
Inheritance dreams (or mirages)

Chapter 3: Demographics
Introduction
Looking at the numbers
Aged share of population grows over time
People who reach age 75 will live another 12 years on average
Table 3-1: Projected Population of the U.S. through 2050 (percentages by age group)
Figure 3-1: Projected Life Expectancy, 2010 (in years)
Impressive Gains In Life Expectancy
Figure 3-2: Life Expectancy: 1900, 2000 and 2003 (in years)
Simmons Consumer Survey
More women than men at every age
Figure 3-3: Gender: Baby Boomers and Generation X, 2007-2008 (percent)
Non-Hispanic white percentage increases with increasing age
Figure 3-4: Ethnicity: Baby Boomers and Generation X, 2007-2008 (percent)
Geographic patterns of generations show slight variance
Figure 3-5: Geographic Region: Baby Boomers and Generation X, 2007-2008 (percent)
Gen X more likely to be college grads
Figure 3-6: Highest Level of Educational Attainment: Baby Boomers and Generation X, 2007-2008 (percent)
Figure 3-7: Undergraduate or Graduate College Degree: Gen X Segments, 2007-2008 (percent)
Baby Boomers and Gen X favor full-time employment
Figure 3-8: Employment Status: Baby Boomers and Generation X, 2007-2008 (percent)
Gen Xers prominent in managerial and professional/technical occupations
Both Baby Boomers and Gen X outearn adults in general
Figure 3-10: Profession: Baby Boomers and Generation X, 2007-2008 (percent)
Figure 3-11: Individual Employment Income: Baby Boomers and Generation X, 2007-2008 (percent)
Gen X rich in dual-income households
Figure 3-12: Number of Employed Adults in Household: Baby Boomers and Generation X, 2007-2008 (percent)
Boomers most likely to have highest household income
Figure 3-13: Household Income: Baby Boomers and Generation X, 2007-2008 (percent)
Figure 3-14: Household Income $75,000 or More: Baby Boomer and Generation X Segments, 2007-2008 (percent)
Baby Boomers and Gen X more likely to be married
Figure 3-15: Marital Status: Baby Boomers and Generation X, 2007-2008 (percent)
Larger households are younger households
Figure 3-16: Number of People in Household: Baby Boomers and Generation X, 2007-2008 (percent)
Younger householders = more children
Figure 3-17: Number of Children in Household: Baby Boomers and Generation X, 2007-2008 (percent)
Boomers more likely to own residence
Figure 3-18: Kind of Residence: Baby Boomers and Generation X, 2007-2008 (percent)
Values of residences similar among age groups
Figure 3-19: Value of Residence: Baby Boomers and Generation X, 2007-2008 (percent)
Health/long-term care outlook
Healthy, active self-image keeps Boomers in the game
Healthcare challenges multiply
Table 3-2: Health Problems By Age (percent of respondents)
Studies confirm Boomers are often too fat, out of shape
Drugs, therapies combat chronic complaints
What about Generation X’s health?
Table 3-3: Leading Causes of Death By Age (ranking)
Employment trends
Boomers plan to continue employment
Difficulties in finding employment in middle age
Boomers fear layoffs, forced retirement
Loss of job can mean underfunded future
Self-employment a viable option
Male Boomerpreneurs outnumber females, but gap closing
Preventing the Boomer brain drain
Diverse self-employed segment may forecast future entrepreneurship
Boomers create their own businesses
Self-employed Boomers want to stick with it
Part-time employment in retirement
Employment prospects for Gen X as they approach retirement?
Characteristics of those with greater financial resources
Ethnicity of higher-income adults varies between Baby Boomers and Gen X
Figure 3-20: Ethnicity of Higher Income Baby Boomers and Generation X: 2007-2008 (percent)
Higher education correlates with higher-income households
Figure 3-21: Highest Level of Educational Attainment of Higher Income Baby Boomers and Generation X: 2007-2008 (percent)
Most types of jobs = more money
Figure 3-22: Professions of Higher Income Baby Boomers and Generation X: 2007-2008 (percent)
Marriage associated with higher income
Figure 3-23: Marital Status of Higher Income Baby Boomers and Generation X: 2007-2008 (percent)
Figure 3-24: Number of Children in Household of Higher Income Baby Boomers And Generation X: 2007-2008 (percent)
Higher-income Boomers and Gen Xers more likely to own higher-value homes
Figure 3-25: Kind of Residence of Higher Income Baby Boomers and Generation X: 2007-2008 (percent)
Figure 3-26: Value of Residence of Higher Income Baby Boomers and Generation X: 2007-2008 (percent)
Table 3-4: Overview of Demographic Data, 2007-2008 (percent and index)
Table 3-5: Overview of Higher-Income Demographic Data, 2007-2008 (percent and index)

Chapter 4: Psychographics
Simmons Consumer Survey
Fundamental attitudes and impact on retirement planning
Figure 4-1: “I Enjoy Taking Risks,” Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-2: “I Am An Optimist,” Agree A Lot: 2007-2008 (percent of U.S. adults)
Less than half believe financial security in retirement is the individual’s responsibility
Figure 4-3: “Financial Security for Retirement Is Individual’s Responsibility,” Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-4: “I Know As Much As Possible Before I Commit To Financial Services,” Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-5: “I Feel Secure Financially,” Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-6: “Investing In The Stock Market Is Too Risky,” 2007-2008 (percent of U.S. adults)
Figure 4-7: “I Prefer to Let Professionals Do My Taxes,” Agree A Lot, 2007-2008 (percent of U.S. adults)
Baby Boomers’ beliefs largely reflect those of adults overall
Gen Xers lag overall population in certain financial attitudes
Implications
Attitudes of higher-income Baby Boomers and Gen Xers
Figure 4-8: “Financial Security for Retirement Is Individual’s Responsibility,” All Adults and $75,000+ Households, Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-9: “I Know As Much As Possible Before I Commit to Financial Services,” All Adults and $75,000+ Households, Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-10: “I Feel Secure Financially,” All Adults and $75,000+ Households, Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-11: “I Leave Financial Arrangements to Someone Else,” All Adults and $75,000+ Households, Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-12: “Investing iIn the Stock Market Is too Risky,” All Adults and $75,000+ Households, Agree A Lot: 2007-2008 (percent of U.S. adults)
Figure 4-13: “I Prefer to Let Professionals Do My Taxes,” All Adults and $75,000+ Households, Agree A Lot: 2007-2008 (percent of U.S. adults)
Computers and financial planning
Gen X prefers online financial activities
Figure 4-14: Internet Usage, 2007-2008 (percent of U.S. adults)
Figure 4-15: Online Activities and Websites Visited, Last 30 Days: 2007-2008 (percent of U.S. adults)
Figure 4-16: Selected Financial Reading Activities in Last 6 Months: 2007-2008 (percent of U.S. adults)
Higher-income Baby Boomers and Gen Xers differ from each other in use of financial media
Figure 4-17: Internet Usage, Higher-Income Adults ($75,000+ Households): 2007-2008 (percent of U.S. adults)
Figure 4-18: Online Activities, Last 30 Days, Higher-Income Adults ($75,000+ Households): 2007-2008 (percent of U.S. adults)
Figure 4-19: Selected Financial Reading Activities in Last 6 Months, Higher-Income Adults ($75,000+ Households): 2007-2008 (percent of U.S. adults)
Empty-nest, older segments favor online financial management
Table 4-1: Overview of Psychographic Data, 2007-2008 (percent and index)
Table 4-2: Overview of Psychographic Data, 2007-2008 (percent and index)
Table 4-3: Higher-Income Household Baby Boomer Psychographic Data, 2007-2008 (percent and index)
Table 4-4: Higher-Income Household Generation X Psychographic Data, 2007-2008 (percent and index)
Table 4-5: Overview of Computer/Media Use Patterns, 2007-2008 (percent and index)
Table 4-6: Higher-Income Household Computer/Media Use Patterns, 2007-2008 (percent and index)

Chapter 5: The Retirement Instruments Market
Overview of retirement resources
Table 5-1: U.S. Retirement Assets By Type, 1998-2007 (in trillions of dollars)
Projections of retirement resources
Figure 5-1: Projections of U.S. Retirement Assets by Type: Straight Line Projections, 2008-2012 (in billions of dollars)
Figure 5-2: Projections of U.S. Retirement Assets by Type: Adjusted for Nominal GDP as Projected by Congressional Budget Office, 2008-2012 (in billions of dollars)
Retirement resources from the individual’s perspective
All income sources
Table 5-2: Annual Income Saved During Last Year, 2008 (percent)
Table 5-3: Confidence in Saving Enough to Meet Future Needs, 2008 (percent)
Current financial and retirement resources of Baby Boomers and Gen X
Financial investment products
Baby Boomers tend to have more financial products than Gen Xers
Table 5-4: Overview of Ownership of Investment Products, 2007-2008 (percent of U.S. adults)
Table 5-5: Value of Securities Owned, 2007-2008 (percent of U.S. adults)
Table 5-6: Mutual Fund Values, 2007-2008 (percent of U.S. adults)
Table 5-7: Money Market Values, 2007-2008 (percent of U.S. adults)
Brokerage accounts dispersed among many providers
Table 5-8: Mutual Fund/Brokerage Accounts, 2007-2008 (percent of U.S. adults)
Table 5-9: Retirement Accounts, 2007-2008 (percent of U.S. adults)
Banking and investment products
Savings accounts are leading banking/investment products
Table 5-10: Ownership of Bank Products, 2007-2008 (percent of U.S. adults)
Bank of America is leader in banking
Table 5-11: Banks Used in Last 12 Months, 2007-2008 (percent of U.S. adults)
Insurance products
Table 5-12: Life Insurance Companies, 2007-2008 (percent of U.S. adults)
Financial products owned by higher-income Baby Boomers and Gen Xers
Table 5-13: Ownership of Financial Products By Higher-Income Households, 2007-2008 (percent of U.S. adults)
Individual/small business retirement products
IRAs
Table 5-14: IRA Ownership, 2007-2008 (percent of U.S. adults)
Traditional IRA versus Roth
Self-directed IRAs
Solo 401k
Structuring retirement funds to finance a new business
Proposed legislation
SEPs and Keoghs
Table 5-15: Keogh/Sep-Ira/Pension Ownership, 2007-2008 (percent of U.S. adults)
Annuities
Table 5-16: Ownership of Tax-Sheltered Annuities, 2007-2008 (percent of U.S. adults)
Single premium immediate annuity (SPIA)
Living benefits
Reverse mortgages and home equity
How reverse mortgages work
Table 5-17: Annual HECM Production, FY 1990-FY 2008 (number of loans)
Positive outlook for reverse mortgages
Long-term care insurance
Table 5-18: Long-Term Care Insurance: Industry Experience (2006 annual statement reporting year, reported 2005)
Individual LTCi
Figure 5-3: Individual LTCi Sales By Issue Age, 2007 (percent)
Figure 5-4: Individual LTCi Claimant Age for New Claims Opened, 2007 (percent)
Group LTCi
Figure 5-5: Group LTCi Sales by Issue Age, 2007 (percent)
Figure 5-6: Group LTCi Claimant Age for New Claims Opened, 2007 (percent)
The LTCi purchasing decision?
Innovative LTCi products
Life insurance
Life insurance settlements
Disability income insurance
Mutual fund products designed for retirement investing
Inheritance
Famous “Boomer inheritances” going to elders
Distribution phase
Table 5-18: Overview of Financial Products Data, 2007-2008 (percent and index)
Table 5-19: Overview of Financial Products Data, 2007-2008 (percent and index)

Chapter 6: Focus on Employer-Sponsored Retirement Products
The employee perspective
Pensions/defined benefit plans
Cash balance plans
412(i) plans
Defined contribution plans
401ks
Status of 401k plans
Participation by age
Table 6-1: 401k Ownership, 2007-2008 (percent of U.S. adults)
401k fees
401k fallout from 2008 financial crisis
Impact of the Pension Protection Act of 2006
New 401k products and features
Roth 401ks
Annuities surfacing as intriguing 401k option
Representative annuity products
Exchange Traded Fund (EFT) 401k platform
Representative exchange-traded funds
Collective investment funds
401k debit cards
Lifestyle and lifecycle funds
Managed accounts
Advice is welcome!
Representative products and programs
Advice to troubled mortgage holders
Automatic enrollment
401k/cash balance combo
401k rollovers
Legal challenges
Financially troubled employer sued for stock losses in 401k plan
403bs
Administrative and information services
403b litigation
Representative programs
457 plans
Simple IRAs
Defined contribution recordkeepers
Table 6-2: Top 10 Defined Contribution Recordkeepers By Total Recordkeeping Assets, 2008 (in millions of dollars)
Table 6-3: Top 10 Defined Contribution Recordkeepers By Recordkeeping Assets in 401k Plans, 2007 (in billions of dollars)
Table 6-4: Top 10 Defined Contribution Recordkeepers By Recordkeeping Assets in 403b Plans, 2007 (in billions of dollars)
Table 6-5: Top 10 Defined Contribution Recordkeepers By Recordkeeping Assets in 457 Plans, 2007 (in billions of dollars)

Chapter 7: Distribution Channels; Marketing and Advertising Campaigns
Introduction
Financial planners
Banks
Mutual fund and investment management companies
Representative products
Insurance agents
Internet/direct response
Marketing and Advertising Campaigns
Targeting Baby Boomers
Targeting Generation X
Seven Case Studies
Bank of America
Charles Schwab
Edward Jones
Fidelity Investments
MetLife
New products
Research and education
Publicity, marketing and distribution programs
Nationwide
Wachovia
Other Companies Worthy of Note
Allstate
Ameriprise Financial
Citigroup
John Hancock
Liberty Mutual
Lincoln Financial
Wells Fargo
New media
YouTube meets financial literacy

Appendix: Addresses of Selected Companies, Trade and Research Organizations

Abstract:

Total U.S. retirement assets were valued at $17.6 trillion in 2007, up more than six percent over 2006. The largest part of these assets is divided almost evenly among individual retirement accounts, defined contribution plans and government pension plans. However, IRAs and annuities posted the biggest compound annual growth rates.

The United States is confronted with major issues that are shaping retirement planning and retirement products. A look at the big picture starts with a fundamental question: What is retirement? It then introduces economic, social and political issues that shape the national conversation about retirement and the individualís role in planning for his or her own retirement.

The Retirement Products Market for Baby Boomers and Generation X in the U.S. is a comprehensive treatment of the market's growth (including two forecasts), market drivers for these products, including trends in retirement attitudes, the economic outlook, solvency outlooks for Social Security, Medicare and Medicaid, changing lifestyles of the two generations and how to determine appropriate investment goals in retirement planning.

Demographic and psychographic characteristics, as well as patterns in household computer/media usage, of these generational markets are presented, supported by in-depth survey data from Simmons Market Research Bureau. Products for the retirement instruments market, including personal, self-employment and corporate products are explained, along with in-depth ownership data, relevant legislative and regulatory developments and specific innovative products. Distribution channels, as well as trends in marketing and advertising campaigns, are portrayed, illustrated with in-depth treatments of seven significant marketing programs.

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