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Americans Worried They'll Mess Up Retirement Income Planning
Almost half of Americans have no retirement income plan at all
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Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.
Today we’re discussing the recent finding that almost half of Americans have no plans for income in retirement - and how advisors can plug that gap.
So, let’s get into the Industry Chatter!
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INDUSTRY CHATTER
New research from Allianz Life reveals significant concerns among Americans about retirement income planning. Nearly half of investors worry about how to take distributions from their retirement plans, while 44% admit they have no retirement income plan at all. These concerns are particularly timely as the "Great Retirement" begins, with approximately 13,000 Americans turning 65 daily.
Kelly LaVigne, vice president of consumer insights at Allianz Life, emphasizes that retirement readiness extends beyond asset accumulation to understanding how those assets will fund post-retirement life. Without proper planning, retirees risk making costly errors in tax management and asset drawdown strategies, potentially compromising their retirement assets' longevity.
Almost Half Of Americans Worried They’ll Live Too Frugally
The survey also found that 48% of investors fear living too frugally and not enjoying their retirement quality of life. This highlights a common tendency among retirees to underspend when lacking a comprehensive income strategy.
A concerning communication gap exists between advisors and clients regarding retirement income planning. While 62% of advisors claim they discuss secure income with clients, only 27% of investors recall these conversations, according to the Alliance for Lifetime Income's 2024 study. Similarly, 96% of advisors say they discuss account withdrawal timing, but only 66% of clients remember these discussions.
Retirement Plans Can Now Offer More Guaranteed Income
Recent legislative changes through the SECURE 2.0 Act have expanded retirement plans' ability to offer guaranteed income products and annuities. The law allows for tax-free rollovers of up to 25% of plan assets to qualified longevity annuity contracts (QLACs), which can reduce required minimum distributions and defer income until age 85.
Industry experts suggest advisors need to shift their focus from pure investment management to secure income planning. This transition becomes increasingly important as annuity sales reach $1.3 trillion over the past four years, indicating strong consumer interest in guaranteed income solutions.
To address these challenges, LaVigne recommends implementing risk-mitigation strategies that address concerns about longevity risk, inflation, taxes, and healthcare costs as part of a comprehensive retirement income plan.
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MARKET RECAP
The U.S. stock market experienced a setback at the end of October, breaking a five-month winning streak as election uncertainties and mixed tech earnings dampened risk sentiment.
A key measure of market turbulence, the CBOE Volatility Index, or VIX, surged by 34% last month, marking the third-largest increase for an October in an election year.
Tech giants' earnings were underwhelming, except for Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN). None of the other “Magnificent Seven” companies posted positive weekly performance. As a result, the Roundhill Magnificent Seven ETF (MAGS) fell nearly 2% for the week. This marks the worst weekly performance in two months.
Among mega-cap companies, the top performers for the week were Charter Communications Inc. (CHTR) and Booking Holdings Inc. (BKNG), both rising approximately 9%. Booking also marked the strongest weekly gains since August 2022.
The main laggards were Advanced Micro Devices Inc. (AMD) and Eli Lilly and Company (LLY), down 9% and 8%, respectively, for the week.
On the macroeconomic front, the U.S. economy saw a surprising slowdown in job growth in October, with nonfarm payrolls increasing by just 12,000—nearly a four-year low and well below the expected 113,000.
Factors such as hurricanes and strikes likely contributed to the hiring slowdown, while unemployment held relatively steady, indicating no significant rise in layoffs.
The labor market report has strengthened expectations for Federal Reserve rate cuts. Markets are fully pricing in a 25-basis-point cut at Thursday's meeting and assigning an 85% probability to a similar cut at the Fed’s final meeting of the year in of December.
State Betting Odds
As the 2024 U.S. presidential election approaches, state-by-state betting odds reveal a tight race between Donald Trump and Kamala Harris, with key battleground states like Pennsylvania, Michigan, and Arizona showing narrow margins, making them pivotal in the final outcome.
Gold ETF Surge
The SPDR Gold Trust (GLD) saw $1.8 billion in inflows during October, its highest in over two years. Rising investment demand continues pushing gold toward record highs as investors turn to this safe-haven asset at a time of political upheaval and fiscal uncertainty.
Ford Halts F-150 Lightning Production
Ford Motor Co. (F) is pausing F-150 Lightning production from Nov. 18 to Jan. 6, responding to Tesla Inc. (TSLA)'s Cybertruck sales surge. The move aims to recalibrate production with demand and improve profitability for the Michigan-based automaker.
THE WEEK AHEAD
Economic Data
Monday: Australian interest rate decision, US factory orders
Tuesday: US and global services purchasing managers’ index
Wednesday: German factory orders
Thursday: US Fed interest rate decision
Friday: US consumer sentiment and expectations
Earnings
Click here for the full calendar of economic data and earnings reports.
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