Forty-five percent of retirees still have their assets in retirement savings plans through their employers, according to a new LIMRA study. One-fifth of retirees own three or more IRAs.
The survey, conducted in October 2010, interviewed individuals between 55 and 79 who had been retired for at least a year and had household incomes of at least $35,000.
"While many retirees may think retaining multiple retirement plans or IRAs is a good diversification plan, doing so can make it difficult to measure whether their investments are effectively aligned with their retirement goals," said Jafor Iqbal, associate managing director of LIMRA Retirement Research. "Consolidating assets under one professional manager or institution gives retirees access to information and guidance, typically at a lower cost, to help make the most out of a retirement plan."
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With more than $400 billion in the annual IRA rollover market, it is important that insurers understand what motivates retirees and pre-retirees to rollover or consolidate their money with a financial firm. LIMRA recommends five steps for insurers to attract more retiree assets.
- Provide online resources. Most retirees decide what to do with their retirement plan balances well before retirement. Providing online resources like retirement calculators and checklists can help insurance companies develop relationships with employees approaching retirement and build brand awareness.
- Be responsive and ready to react quickly. LIMRA research shows that a majority of retirees leave their employer-sponsored plans within the first year of their retirement.
- Provide a comprehensive plan that creates a retirement income stream and addresses other risks retirees face.
- Reach out to pre-retirees and establish a relationship before they enter retirement. The report found that existing relationships are critical to securing rollover business. "Offering personalized investment guidance can be a way for companies to strengthen relationships and increase their chances of retaining assets.
- Offer guidance about taxes and other required distributions.
"Bottom line, insurers need to do a better job communicating with their clients and prospects before they retire, when they are still making decisions on how to invest their money in retirement," Iqbal said. "The difference between capturing the assets and losing them to a competitor is whether you are with your clients when they have to cross some of the financial decision points before and during retirement."
LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness.
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