Consumer Perceptions of Insured Retirement Products Catherine J

Consumer Perceptions of Insured Retirement Products Catherine J. Weatherford President and CEO, IRI

Framing The Issues • The Fiscal Cliff – uncertainty Surrounding Future Tax Policy. • Market Volatility – heightened and ongoing since September 2008.

Focus on Middle Income • For the purposes of IRI’s research, middle income is defined as $30, 000 to $75, 000. • Research conducted by Matthew Greenwald and Gallup indicates that 64% of buyers of nonqualified annuity contracts had annual incomes less than $75, 000. • The middle class is traditionally seen as the bedrock of American economic success, yet the middle class is facing increased economic stress.

The Importance of Tax Deferral • 42% of middle-income Boomers consider tax deferral very important when selecting a retirement product. • 23% of middle-income Boomers would be less likely to save for retirement if tax deferral is reduced or eliminated

Response to Increases in Contribution Limits • 25% of middle-income Boomers would be more likely to save if contribution limits on 401(k) plans were increased. • 21% of middle-income Boomers would be more likely to save if contribution limits on IRAs were increased.

Response to Increases in Taxes • 61% of middle-income Boomers would curtail their level of retirement savings in response to an increases in income taxes. • 34% of middle-income Boomers would be less likely to save should Social Security payroll taxes increase. • 35% of middle-income Boomers would be less likely to save should capital gains taxes increase.

Importance of Guaranteed Income in Retirement • Annuities are the only product, other than Social Security and employment-based defined benefit plans, that can provide this guarantee. • This guarantee is important to middle-income individuals: – 18% of middle-income Boomers and 24% of middle-income Gen. Xers stated guaranteed income is the one most important trait in a retirement investment product.

Annuity Ownership and Retirement Confidence • Among Boomers who own an annuity, 53% are extremely or very confident in their retirement planning, compared to 31% who do not. • Among Gen. Xers who own an annuity, 49% are extremely or very confident, compared with 31% who do not.

Annuity Ownership and Positive Planning Behaviors • 70% of Boomer and 60% of Gen. Xer annuity owners have completed a retirement savings need calculation. This is compared with 44% of Boomers and 34% of Gen. Xers who do not own an annuity. • 74% of Baby Boomer and 62% of Gen. Xer annuity owners have consulted with a financial advisor compared with 35% of Boomers and 30% of Gen. Xers who do not own an annuity.