Source: NAVA OUTLOOK March/April 2005 Volume 14, Number 2 Page 1 of 4
Payout Annuities AND THE RETIREMENT INCOME MARKET
By Borden Ayers and James R. Sholder
As financial service companies continue to explore ways to expand their markets and business
opportunities, they are coming to recognize the growing potential for retirement income
management products and services.
The Needs of a Growing Retirement Market
It is no secret that the proportion of retirees in our nation is going to rapidly increase as 77
million baby boomers approach retirement age.
Over the next five years, consumers near or transitioning into retirement (the 55-64 age group)
will represent the fastest-growing population segment at 3.8% per year – or 4.5 times the overall
population growth rate. The 55+ age group will soon account for slightly more than 24% of the
total US population.
Moreover, this older segment of the population owns a huge and growing pool of assets, much of
which sits in their defined contribution plans. Based on research conducted by The Diversified
Services Group, Inc. (DSG), we estimate that investible assets (excluding home-equity) in the
hands of the 55+ segment currently amount to more than $6 trillion. These assets are generally
controlled by the consumer, and will be used to help provide a stream of income during
Recognizing that they will be personally responsible for providing a significant portion of their
retirement income, many pre-retirees are looking for advice and solutions that will help them
turn their assets into “pensions” or “retirement paychecks.”
Providing Retirement Income Solutions
These consumer trends will provide major opportunities for financial services firms to offer
solutions at each of three stages: prior to retirement, the transition from employee to retiree, and
during retirement. How companies position themselves, their products, and their marketing
efforts will determine how much of this major opportunity they will capture.