In an effort to drill further into attitudes about guarantees like Social Security and the deployment of retirement savings to support a lifetime in retirement, CANNEX has partnered with Greenwald & Associates to develop a new annual “Guaranteed Lifetime Income (GLI) Study.” The initial study has just been completed, and the results from more than 1,000 respondents reveal that retirees with investable assets greater than $100,000 depend on guaranteed lifetime income to cover a majority of their living expenses — 79% on average. In fact, more than 40% of those interviewed rely completely on guaranteed lifetime income sources and do not tap into their investments.

The unfortunate reality for current and future retirees is that employer pensions are less common and the existing benefit levels maintained by Social Security are under attack. In Washington, cuts have been threatened and debated over a Social Security program that many predict won’t be solvent by 2033 in its current form. When they factor in the inevitable increases to Medicare costs that will shift more burden to retirees over time, it’s not surprising that so many Americans are concerned about funding their retirement.

Clearly, if Americans expect to cover most of their retirement expenses with sources of guaranteed income, they are going to have to fund more of this from their own savings. And, the only true guaranteed source of lifetime income comes in the form of an annuity.

The GLI Study measures how much consumers ages 55 to 75 value guaranteed lifetime income, their familiarity with the various annuity products available in the market today and how much they value what an annuity can provide given the commitment required to hold on to these products. Detailed results from each of these three components are then combined to derive a GLI Appeal Index that measures the likelihood of a consumer to own or consider the purchase of an annuity. In 2014, a mere 16 percent of consumers scored highly on the GLI Appeal Index.

The initial 2014 GLI Study revealed some interesting results, including:

• Seventy-eight percent of consumers consider the use of an annuity in addition to Social Security to be very valuable. Those who expressed the greatest appreciation for guaranteed lifetime income’s value include women, those with lower assets (less than $1 million), those who rely on others for investment decisions, and those who remember an advisor discussing annuities.
• Few consumers understand how annuity products can be allocated to support their overall retirement portfolio. For example, providing the flexibility to increase their exposure to equities, or giving them greater opportunity to grow their other investments.
• Most consumers don’t understand the differences between various types of annuities. Only three in 10 consumers said they are highly familiar with fixed annuities, compared to two-thirds of consumers who say they are highly familiar with mutual funds.

Although traditional fixed annuities enjoy the most familiarity, from the table below, you can see that fixed indexed annuities (with or without a withdrawal benefit) rank lowest, along with immediate income annuities. So it’s really no surprise that mutual funds are by far the most familiar products among consumers.