The changing retirement landscape

A look at the future of retirement

Principal® Retirement and Income Solutions executive leaders, Nora Everett and Sri Reddy, share insights from new research we recently conducted with pre-retirees and retirees.

Watch the video to learn how you can leverage these insights to help make clients feel more comfortable and confident in their transition to retirement. 

You can also download the presentation (PDF)

Download transcript (PDF)

Natalie: It is now my pleasure to introduce and turn the program over to your host, Kevin Morris. Kevin, the floor is yours.

Kevin Morris: Well, thank you Natalie. Thank you very much. Thank you to everybody for joining us and taking time out of your schedule today. My name is Kevin Morris. I run marketing for our retirement division here at Principal Financial Group.

We have a good group of folks here in the room with me to talk about the changing landscape in retirement and how we can help as an organization. We are really passionate about this topic, as we've been in the retirement space for multiple decades. And the things that we've seen over the years continue to evolve. We're going to share some of the research that we have been finding in working with our 5 million retirement participants in a 401k) plan as well as some of the clients we work with and in our retail solutions as well.

Joining me today, we have Nora Everett, who is the President of the Retirement Division. Nora has a background working practicing law in Washington DC. She's run our investment business for the Principal Funds and now runs our retirement business here at Principal. She graduated from William and Mary, which is nicknamed “the Tribe”. [CROSSTALK]

Nora Everett: The Tribe, yeah. Doing your homework.

Kevin Morris: And sits on the Investment Company Institute Board of Governors, ICI, in support of governors. Thanks for joining us today, Nora.

We have Sri Reddy. Sri runs our annuity business, our principal and risk transfer business here at Principal. He recently joined Principal from Prudential, where he ran the retirement income business and spent some time at USAA as Investment Part of the organization. He's got a CFA. He also is the vice chair of the Employee Retirement Income Security Acts, (ERISA) vice chair of the Advisory Council. And he is a Baylor Bear at heart.

Sri Reddy: I am.

Kevin Morris: Thank you for joining us.

Sri Reddy: I’m happy to be here.

Kevin Morris: Thank you.

And Joe Moklebust. So, Joe has an interesting role in the organization. Joe gets up and helps advisors every day. And Joe is part of our advanced retirement team. Joe travels across the nation helping advisors with the very advanced challenges that they face with their clients with regards to Social Security, Medicare and other retirement issues. While a lot of us get up thinking about a lot of things in the space of retirement, how to attract new clients, Joe thinks about how to help advisors. And he spends his time working with those more advanced solutions like Medicare and Social Security. And he's a graduate from the University of Iowa. Thanks for joining us here today, Joe.

Joe Moklebust: My pleasure. Thank you for having me.

Kevin Morris: What we're going to cover today is just some of our views of the world and what we're seeing in how retirement has changed from yesterday, to today, to tomorrow. We have some new research that we've gone to the market with and gone to the field with and we're going to talk about some of that. We’ll share what we’re finding and how can you sort through that. And how as an organization we can help.

I think this research, what we've seen, are some things that you may not find anywhere else because it's our own proprietary research. And I think it comes down to fewer and fewer people are covered the same ways as they were 20, 30, 40 years ago when it comes to retirement.

We're going to start to sort of unfold that a bit and discuss how our research talks about not the financial aspects of retirement, but equally important, the behavioral aspects of retirement.

And with that, we will start with Nora Everett talking at a real high level about what’s happening in the retirement market for pre-retirees and retirees as we move forward.

Nora Everett: Great, thanks Kevin. Well, no surprise to anybody on this phone call, the retirement market is absolutely huge and growing; I mean it's pretty phenomenal. The statistics here confirm that the demographics are really significant and telling for all us in our retirement practices.

Today, if you look at the retirement income market, and this is defined as investable assets for those 55 years and older, investable assets for those 55 and older, today we're looking at 17.5 trillion. And look at how that number almost doubles by 2026. So, the growth here is pretty remarkable. In 2018, we had about 10,000 and many of you would recognize the stat — 10,000 Americans reaching 65 everyday, boomers retiring. And by 2026, this is going to go to 11,000 — you see the trajectory. Currently roughly 50 million retirees, and at that current rate of retirement by 2025, we're going to see closer to 66 million and then you see the 2035 number for those of you that are very young and are still going to be in the practice in 2035.

But, clearly there’s just a host of opportunities for all of us. And, you think about it, essential services that I’m sure a lot of you on the phone who are advisors are involved in, from the basics of addressing income and expenses in retirement. We talk about allocation, asset allocation across various investments. We talk about managing for longevity risk, obviously inflation, but there’s some other really key issues that aren't always addressed and Joe will speak to some of these. 

I mean, the Social Security claiming strategies. For those of you that have started to delve into this piece — I mean, this is really complicated whether you've got divorce issues, you've got spouse issues, I mean, there’s just so much complexity in that. Those claiming strategies that we often advise folks, that alone would take you to an advisor with regard to claiming strategies, order of withdrawal from assets, tax efficiency.

And then there’s the biggest issue here around long-term care. Again, highly uncertain but really needs to be addressed. So, lots of opportunity.

If you look at the changing environment — and again, this isn’t going to surprise anybody, but this is really the first generation of retirees that's going to deal with a flip here. They're going to deal with the fact that traditional pensions, as we all know, are moving away. It truly is the area of personal responsibility with the idea that people, unless they have an advisor by their side, are on their own trying to figure out how to take this nest egg that they accumulated and not just convert it into an income, but deal with all those withdrawal strategies around a lot of significant variables that are going to change and they're going to be dynamic throughout a 20 to 30 year retirement. So, just a huge opportunity for advisors.

Sri Reddy: And Nora, what I'd add to what you have is when you look at the pyramid — even though it's inverted, it almost indicates a vast majority of Americans will have a pension and what we know is that's not going to be the case. There have been studies from LIMRA that shows every generation that transpires, 50% fewer people have pensions.

And if we actually move to the next slide, I think one of the more telling aspects is not only are fewer retirees going to receive a pension, the amount that the pension represents as a part of their total income is lower. Now that creates some really interesting opportunities. If I was an advisor in my practice, I'd be looking at quintiles of income that make up the retirees segment. For the vast majority who are in the bottom two quintiles, Social Security will represent give or take between 90% and 105% of pre-retirement income. But if you're in the third, fourth or fifth quintile there's tremendous opportunity because starting with the third quintile, we know that Social Security only represents about 55% of pre-retirement income and at the upper end of the segments it’s a much smaller percentage. So, tremendous opportunity there.

Kevin Morris: Yes, and not only do we have the financial aspect of it, but it’s also very personal — it’s a very personal adventure for folks as they move from one phase of their life to another. And it's not as black and white — I think in, for many years we would talk about phases and it was more like an off switch of a light and I think today it's more like a dimmer switch where it gradually changes from our retirement.

Nora, you are out interacting with clients in a lot of venues, what are you kind of hear from your end?

Nora Everett: Sure. So, we really — one of the things we've done recently, in fact this last summer is, we had the opportunity to do some primary research with a number of our customers, a couple of thousand of our customers. And there were Gen Xers, there were baby boomers, there was the silent generation customers. We got all the generations and we were able to — through that primary research — really start to identify some similarities and differences between pre-retirees and retirees.

And some of the high-level findings I don’t think will surprise you but just to give you a sense for it — and Kevin made the point — this is really, there's a lot more emotional investment in retirement. We're seeing that evolve. Because of what Kevin has mentioned, our survey data is just making it clear that it’s going to be a lot less linear today. When we are talking with folks, they're talking about pursuing very different retirement lifestyles. It's just a lot of diversity around how people view retirement. Partial retirement, full retirement timing. That bright line is long gone between a career — a long career with one employer and then a traditional pension-based retirement. And, as a result of that, I see a huge opportunity for advisors to take even a more holistic approach to this relationship. As we work with our participants and individuals who are rolling into retirement they're really hungry not just for the financial advice, obviously and that's important, but almost a life coach. Helping them decide when they can retire and equally important kind of flushing out how they are going to, what they are going to do in retirement and directly correlate it to what they're going to need to spend.

So, we're seeing this mix of emotions with people, and on the one hand there's this fear of walking away from a paycheck, walking away from employer health insurance and uncertainty about leaving a job that may have defined you, may have wholly defined you. And then with that mix of emotion about having more time with family, friends, hobby, travel. One thing that surprised me with our research was there was one question and it was asked to both pre-retirees and retirees: How will you, or how did you know when you were ready to retire? And what surprised me is far and away, the number one answer to that was 'gut feel'. As somebody that's in the industry and in the business, that caught me off guard. The number two answer was what I would have expected as the number one answer, which was Social Security eligible, hit my savings goal, but it's just another indication about how emotional and personal this particular transition is and how the role of an advisor is really turning into as much of a life coach in some sense of a financial advisor.

Kevin Morris: And we've had a couple of different quotes up there as Nora has been speaking. And this — the feel of all of them — we had the opportunity to read all of them. These are just a couple of quotes, but the hundreds of quotes that we read are things about family and not having a daily schedule, not worrying about Monday morning. All of those things which is, you know, different than the people walking up and down the beach. And how do we help individuals prepare themselves emotionally and so they can do things that they want to do within the retirement. And as we move forward, they have some worries that they have going on at the end of the day. So, at the end of it all, the findings that we've seen are things on what they’re worried about most and that’s —  a lot around healthcare and we'll get into that in a second. Social Security which we've mentioned a few different times before and there’s the emotional side is, "Hey, do I want to spend the next 25 years sitting next to my spouse on the couch looking at each other? Do I want to travel? Does she want to travel?" What are the things that are important from a timing perspective? So there's a re acquaintance of getting to know your spouse — if it's someone who is married. And the other part of it is, I think that I think is very interesting to work our way through is individuals as we flip that chart that Nora was talking about earlier, was we flip that chart, individuals aren’t prepared to deal with this lump sum of money that they've saved for the last 25, 30 years in their retirement plans. Where for past generations the plan was what Social Security? What's my DB plan? And as the DB plan continues to shrink in the market place for the amount of coverage that has occurred, people are thinking about how do I take these pockets of money and convert that into income or convert that into a long last stability over the next 10, 15, 20 years of my life? And then how do I balance that out with Social Security? How do I balance that out with Medicare? How do I make sure I don’t spend too much too early? And that's very tough on individuals and it wears on them. So, as we work through that and Joe is out interacting with advisors and clients all the time, one of the main things that he hears is around that number one worry of healthcare cost.

Joe do you just want to talk a little bit about what you’re seeing in the market place?

Joe Moklebust: You bet. I mean, as we've already talked, people have dreams about what they want to do in retirement. But, what’s the practical way of accomplishing those and what are the main concerns that they’re facing? And I think you know, when to sign up for Medicare? How am I going to have medical coverage when I'm no longer employed? Looking at when should I elect my Social Security benefits? Those almost become defining issues of retirement. And particularly with healthcare it's obviously a major concern. You know, life expectancies increasing, we know healthcare costs are rising and there's uncertainty about entitlements such as Medicare and Social Security and it's definitely pulling healthcare concerns to the forefront for retirees.

As noted on the screen you can see that Principal's research found that 64% of pre-retirees and 45% of retirees say that managing healthcare cost is a top concern about retirement. And of course, in addition to that there’s cost-related concerns that most people worry about in terms of their physical and mental well-being.

I also am hearing a lot of concerns about how to avoid a gap in healthcare coverage from those that leave employment prior to being eligible for Medicare. Interestingly we found that 49% of participants retire before they are eligible for Medicare. Of course, continuous coverage is key, and some clients just don't know how they're going to accomplish that. Many accomplish it through a spouse’s plan, but there are other issues that need to be addressed as well.

Kevin Morris: So, when you’re talking to clients — advisors out in the marketplace, Joe, what are some of the main questions that you're getting around healthcare when you are just talking to them in general?

Joe Moklebust: Well, they're concerned about, you know, how are they going to have that coverage? How are they going to be protected? What's going to work for them and how is that going to fit into the timing of their retirement plan?

Kevin Morris: Yeah, I think at the end of it all you know this healthcare issue is a lot of the advisor community that we hear, and again, as you spend time interacting with the advisors, a lot of the advisors aren’t thinking about that aspect of it because it’s something that their organization necessarily 'doesn’t sell'. So, it’s a little bit foreign territory. So, I think some of the things that you and your peer group within Principal have done a nice job of putting data and information and thought capital together to help them wade through some of that maze for helping them put the pieces together with some of the things that they spend more time doing like asset allocation, wealth management, etc.

So, I think there’s a lot of value in learning more and more about this and I think some of the resources that we're able to provide our advisor base on some of the websites that we'll show later — are good resources. You and your team have done a nice job in the field with that. So, I appreciate that.

Joe Moklebust: Well, thanks. We notice that — we approach it and look at retirement from you know, our perspective. Our way of doing things, the tasks that we're involved with as advisors. But, you've got to remember that the clients come in at that from a more holistic perspective. They’re looking at what all the concerns are. And they're coming to you as their financial advisor to seek help in answering those questions. And so, as the financial advisor, you at least need to have some knowledge, some background on that whole healthcare issue.

Kevin Morris: So, some of the data that we see is again, individuals have created this lump of money that they saved over the last 20 years in the 401K generation. And now, they're used to their whole life getting a paycheck every two weeks, or every other or twice a month or what have you. And now as an individual, they go to their advisor talking about how do we convert that to a paycheck? Because the people are used to getting their paycheck and spending money for someone who doesn’t have a paycheck coming in is very uncomfortable at times for individuals. Sri, do you want to talk about what you've seen in that space?

Sri Reddy: I’m happy to Kevin. So, going back, I mean it clearly the slide indicates that most people haven’t decided how to create income. I would argue there's a precursor to this step. And the precursor is deciding what you want to do in retirement. So, building off of Nora's comments around life coach, I think an advisors primary job when talking about retirement with clients is to make sure clients have something to retire into. And one of the things that I counsel folks on is if you're dealing with clients who are a married couple, split them up. Put them in two different rooms, give them a pad and have them individually write what their vision for retirement is. Because often times you'll find it's not synchronized. And why is that important? Beyond even healthcare and physical well-being, one of the areas that gives me primary cause of concern is a rise in divorce rates in retirement. So, if you look at divorce rates in couples aged 50 or older, it's doubled nearly in the last 10 years and doesn’t look like it’s slowing down. Now why is that a concern for me? If you're going to retirement and all of a sudden you end up with half the money that you projected but almost 70% or 80% of the same cost, you’re in a very different situation than you would have been previously. So, that's actually a first step.

So, if we go to the next slide, and actually flip one more please. What I love about the slide when we surveyed our customer over the summer, and we actually asked what you want to do. And clearly time with loved ones is top of the list. The good news with time with loved ones is that it’s free. It doesn’t cost you a whole lot of money, you don’t have to set aside a whole lot for it.

But, of course if you look at what’s trending for reality, travel seems to be up there. Now, there are two or three points I want to illustrate for our advisor partners from this slide. First and foremost, interest and desires will change through retirement. Think about your retirement. It’s 20 to 30 years. That’s no different than a person changing from age 35 to 65, and all of their desires and interest changing as well.

The second thing I'll point out is if you notice a lot of the things that are lower cost items are not necessarily changing as much. But if you look at travel, celebrating, those type of items are continuing to be important in retirement, but other things like working part time are decreasing quite a bit. We don’t know if that’s because of choice or if that’s because of availability. Now often times there may be physical limitations and other things precluding new retirees from working as well, which presents an interesting challenge.

And the last point I will make on this slide is often times as an industry we talk about retirement income as a stagnant number that’s continuous and doesn’t necessarily change year after year. When in reality we know from studies over time that when you retire, the first two to five years after retirement you’re spending actually spikes because you have all this new found time and you have money that you can actually spend. But what also happens is five years after retirement you know that spending slows down quite a bit. And that helping to make sure that our clients understand how to plan for that I think is really important.

Kevin Morris: I think, so we've talked about a bit about healthcare and Medicare. We've talked a bit about creating a paycheck and some of the items that individuals worked their way through. Social Security which is — continues to be of interest for those reaching a certain age and knowing more of the ins and outs … Joe, again Joe has spent a lot of time in the market place talking to advisors about Social Security. Joe do you want to talk a little bit about what you see in that space?

Joe Moklebust: Yeah, and before we get really maybe into the Social Security just to go off of what Sri was saying a little bit, if we had the opportunity to work with clients early on, we can talk about retirement and what their goals and ambitions are in retirement. We can help them accumulate the kind of resources they’re going to need to accomplish those goals. Often times though that’s not the case when we're working with individuals if we haven’t had the opportunity to do that. And, then we're forced with what can you do in retirement given the resources you have. And often times that becomes a difficult conversation you have to have with the retirees that you’re working with. And that’s — I think again where Social Security comes into play and also where you’re looking at you know, when to elect benefits becomes the biggest question and there’s no specific answer to that. It's really individualized based on the needs of each individual person and as it relates to perhaps a spouse.

We do know though that people’s expectations of what they’re going to do in reality are very different. Many people think they’re going to be delaying taking Social Security benefits and end up taking it much earlier than anticipated and that can be for a variety of reasons. But the important thing you can do as an advisor is help them incorporate that decision into their overall retirement plan.

Kevin Morris: Yeah. Got it. You know it’s interesting on the next slide here we talk about — one of the questions about how comfortable are pre-retirees and this is the gist of it. We have people at that age and they’re thinking about what am I going to do, and how am I going to handle this the next 20, 30 years and how comfortable are you, and what an opportunity there is for an advisor.

Nora, what do you see in that space?

Nora Everett: Yeah, so this stat is interesting, you know. It shows that the confidence is relatively low with regards to this planning process. We're seeing only one in four pre-retirees and only one in three retirees quoting that they’re comfortable spending money in retirement and that’s that that combination of planning and just confidence level. Joe talked about one end of the spectrum and interestingly enough — and this is again, was a little counter intuitive to me. We're actually seeing on the other end of the spectrum people that are actually in a good place ready to retire and needing to have an advisor actually create that confidence for them. Not just that they can retire comfortably, but that they can spend in retirement. We're seeing this counter cyclical people that have enough just not being able to — as they move into this new phase of their lives where they don’t have the paycheck coming in — really start to spend and enjoy their retirement.

So, I think situations where advisors again, you talk about life coach are actually the ones ‘getting permission to spend'. So, it’s a nice problem to have is the other end of the spectrum from what Joe was highlighting. But I think it’s an important reminder to us, those of us that are working with — this human nature here with regard to that spend issue.

Kevin Morris: We spend our whole lives saving, saving, saving for retirement, saving for retirement. We talk about savings plans, but I heard someone talk about a spending plan and again that’s not fully counter intuitive for people to think about what’s the spending plan. It sounds a lot more fun than a savings plan. But as people have reached certain ages and have programed themselves, that’s hard to get their head around. Because once you start spending they don’t know if they need that for 20 years, 30 years, two years, etc. The different mentality to say the least. So, the other things that we're seeing as we're moving forward is around the comfort with finances and their financial situation. Again, you see the difference there.

Nora, can you speak to that?

Nora Everett: This just reflects what we were talking about Kevin. It highlights — and if you look at pre-retiree, just a low level of confidence. Both with regards to their current financial situation, spending money as we talked about, and this planning process highlights for me just a huge opportunity for you all and Joe mentioned it, to step in earlier with folks there in their early 50's, mid 50's and really start this planning process and get the benefit of starting to address some of this relatively low confidence around really critical issues.

Kevin Morris: Yeah, so you know, one of the things that we've continued to talk about is — sort of the balance between emotional and financial retirement issues.

And we have a poll, we have a poll that we can work our way through here just to hear what you’re hearing from your clients about what emotional or financial retirement issues are your clients voicing concerns about the most. If you have a chance you'll see something, that cues on the screen to, yeah, there you go, the poll details that are up there. And we'd love to hear from you from what you’re hearing from your clients on possible responses and making sure that people don’t run out of money. Figuring out the best age to retire, mapping out a plan for retiring, and then how to make additional money after retiring. And it’ll be interesting to see what kind of things you’re hearing from your clients that may or may not be different from what we've heard from our clients on this particular issue. So, as we've kind of worked our way through that, one of the things that we've seen with our data is advisors’ beliefs and clients’ beliefs sometimes are not 100% aligned. So, one of the things that we've seen from our data points is about developing a plan to produce retirement income. Where we see individuals — where we see individuals really saying — 64% of our individuals want to produce an income in retirement. Where the advisor beliefs might be closer to 50% and how important that is. And in reality, about 33% of our clients have produced a retirement plan with the help of an advisor.

Looks like the poll here is giving some information on making sure I don’t run out of money is by far the number one concern at 61% of the people who just took this thing here today, is figure out what the best age to retire was third at 12% and just changing here now and mapping a plan out for retirement. Making sure I don’t run out of money. At the end of the day, this is about uncertainty. And what you can do as an advisor to create certainty and build trust because it’s a very, again, emotional and confusing time for individuals as they’ve saved $500,000 over the last 30 years of their life. That’s a dollar amount that’s larger than the equity they have in their home ad not many people are comfortable looking at a large chunk of money in their retirement plan and saying I know exactly what to do with that. Sometimes people have trouble making decisions on if they should have fish or chicken for dinner. Not to mention how to spend $500,000 over the next 30 years to live comfortably. That's where an advisor could come in and help smooth that out for them and provide confidence for them. I think the other thing that I guess we'll work our way into here is transition into retirement is more about the opportunities for you as the advisor we just chatted a bit about that.

Joe, what are — you know, I think you spend a lot of time with the advisors in this phase. Can you just talk a little bit about the opportunities you see for advisors as they transition individuals into retirement?

Joe Moklebust: You bet, and I think it’s an exciting tremendous opportunity for advisors. You really have the best of all worlds coming together. You have the individuals that are in motion. They’re in transition as they’re moving into retirement and that creates the ability to do a number of things. They have assets available that they’re needing often to re-position. Often times moving from an accumulation phase into a distribution phase. And they’re looking for help in navigating through that process. Making those decisions. So, the opportunities for advisors is tremendous. First of all, in terms of retention, just helping and keeping the clients that you’ve currently been working with over the years. You need to be able to respond to them as they transition into this new phase of life. And if you can’t do that they will probably seek someone that will. So, the way to retain your clients is certainly be able to help address the issues as they’re moving into retirement.

Along with that comes consolidation. Often times they’re needing to move money out of an employer plan or they need to consolidate different resources they have into different — combining them together and putting them into different vehicles to now meet the needs to create their own paycheck. To replace the paycheck that they had from their employer.

And when you're helping individuals do that, the ability to receive referrals just skyrockets. If you can help people transition through here, they’re more than willing to give referrals of their friends who are generally facing the same situation or going through that same process, they’re in the same age group. And it’s a tremendous opportunity to continue to build your practice if that’s what you’re looking at this point in time. So, I think that the opportunities are just tremendous.

Sri Reddy: Joe, I’m actually going to add one more to that list. For many of our advisors and the retiree population, one of the more interesting phenomena that we're witnessing is asset values are actually increasing in retirement even though people are spending money, because a lot of folks are spending the — either the interest or spending RMDs or only the earnings. Now what that actually represents is an inter-generational wealth transfer opportunity for advisors that I don’t think a lot of us are having conversations around. I think it’s a wonderful time to involve family, get children or others at the table and start making sure that there’s tax efficient strategy for planning this well.

Joe Moklebust: Absolutely.

Kevin Morris: Yeah, the other thing that’s kind of interesting is those — what we’re finding in the study of those who plan for retirement and have done the things to put themselves in the position just like all parts of life is when you prepare for something and you feel confident going into a presentation or you feel confident going into your test … as a child at school, you generally have better results. I think this is just another test of life in that spirit where those who aren’t really comfortable and understand what’s in front of them then that creates uneasiness. And that really gets into the emotional factor. So, some of the data that we’ve shown here, it just talks about those who are happier in retirement — essentially, I think we all want happy clients.

Nora what do you see here for additional color?

Nora Everett: Yeah, I think it’s kind of — self-explanatory. We are seeing a correlation no surprise between planning and this happiness factor. This was based on, again, those interviews that we did last summer. And I don’t — some of it is intuitive, but it is interesting to start to see just the high correlation between actually having a plan, creating a plan, the confidence that gives you — the confidence that gives you when you’re drawing from a variety of income sources rather than just relying on one. And then just that ability, that confidence around you’re saving. So, it just reinforces what I think we all know which is the plan matters. And it matters not just from a financial perspective but also from a confidence perspective. And then a satisfaction, or call it happiness perspective and that’s a recipe for success.

Sri Reddy: That's actually compounded Kevin, because I think one of the things people also overlook is there’s absolutely a direct correlation between income levels and longevity. In fact, various studies have been published on this issue. But for 65-year-olds, if you’re in the upper quintile of income versus the bottom quintile that can make almost a five and-a-half to six-year difference in your expected longevity. So, I think actually having a plan immunizing tail risk, creating more secure guaranteed income and having a plan to do so will make you happier and help you stay, live longer.

Kevin Morris: Yeah, you know, on that slide you've got 56% are happy in those who create an income plan and retire versus the data point of 38% who don't and on the bottom part of that slide, 47% are more confident that their savings will last whereas those who aren’t putting a plan in place are less happy, excuse me, 11% of those who are less happy.

So, just think about the dynamic of you want to be in the 47% bucket versus the 11% bucket as you move forward. I think at the end of it all, we as an organization here at Principal, have been looking at this for many years and we continue to.

So, we have other studies in the field right now and one of the behavioral side of retirement and having information continuing to flow out to the advisor community.

And we started to put a new website together around to help advisors with the resources there. Please take a look at it around thought leadership, tools, again you'll see some research out there — expertise and information. And also, as we worked our way through that it gets you access to people in your local markets who can help. And people, either your local wholesaler, and or a local service people, or individuals that can bring in the big guns like Joe Moklebust. Who Joe and his team and the advance retirement team again get up thinking about not how to sell products for Principal, not how to sell an annuity, not how to sell a 401K plan. Joe and his team think about to help advisors on these advanced retirement practices like Social Security, like Medicare. They do a lot of speaking engagements across the nation for larger firms in the marketplace as well as branch office meetings. So, the wealth of knowledge there is pretty unlimited to say the least and feel free to explore that site and reach out to your local partner there to move forward.

So — one, before we sort of move on to questions I'd just like to thank our speakers for the highlights here today. And as a reminder we'll have a replay of that for everybody who wants to watch this broadcast multiple times as — you know, you can hang around Thanksgiving and everybody can watch it at your house.

I think one of the things as we move forward — what we want to do is take out a few questions here today. So, one, we want to take some questions but in the meantime, let’s have a survey pop up for everybody there in the audience. Just to see if this type of information was relevant for them and very helpful for them as they’re spending the last 38 minutes with us here at Principal today. Making sure that it hits the information that they might be looking for us to answer, this one or two-minute survey. And then, before we get to questions — before we get to questions any last comments or thoughts from anybody on the speaking panel today? Sri?

Sri Reddy: So, I’m going to start with thanking the advisor community. I think all of you do an incredibly noble job of helping our clients have the confidence and the comfort to get into retirement and get through retirement. Thank you for what you do. Thank you for helping stay the course and stay invested and I look forward to taking your questions.

Kevin Morris: Good. Thank you. So, we've been compiling a few different questions throughout the Webinar. And if you don’t mind I’m just going to fire one right out of the gate here and then we'll work our way through a few others here. And so, Nora, maybe you can address this one. How do you find the balance — how do you balance the financial and emotional needs of clients as they transition into retirement?

Nora Everett: Yeah, and this Kevin, we've talked a lot about this today. So, I think the bottom line is we all know that most of us are wired for math and finances and we talked about how psychology and counselling is just a really integral part of both attracting and retaining customers. It’s a heart and mind moment for sure. And you talk about — you remember the health concerns top of the list. Concerns for pre-retirees and really addressing that head on even if you’re coming at it from a financial perspective. And Sri mentioned this, but I don’t think we can overemphasize working with both spouses, both partners. It really isn’t uncommon to see different views and it’s surprising and we’ve all seen this both in our personal lives and professionally when you see significantly different views and as an advisor really becoming a facilitator in those conversations to make sure that everybody gets to the right spot. So, lots of psychology, math and finances is table stakes.

Kevin Morris: Another one we've received is how is longevity being overstated or understated with regards to creating lifetime income for the average 65-year-old? Sri, do you want to give that a crack?

Sri Reddy: I'm happy to Kevin. So, a couple of thoughts here. First and foremost, longevity is absolutely a moving target. So, if you’re trying to skate to where the puck is going, this puck is still moving, and you have no idea where it’s going. In the last century longevity in developed economies improved by almost a full year every decade that’s gone by. So, for someone who's 20 or 25, or 30 today, you’re not even sure what the longevity is going to be 35 years from now when they turn 65. Even for the 65-year-old, you’re not necessarily sure if you work to the averages of 82 for men, 85 for women if that’s going to be sufficient. And more importantly one of the things that is discounted by the notion of longevity is these are all averages. And unfortunately, if you’re not exactly middle line or average, it’s very hard to predict or plan to.

Nora Everett: Yeah, we tend to see it understated with what we’re looking at. We all know the stats — you know, if a couple gets to 65, one’s likely to get over 90 and especially as you work with women or with longer longevity, there definitely is a tendency to underestimate.

Kevin Morris: We have another one here. Sri you've talked about the inter-generational wealth opportunity. Any advice for the advisor audience and how we can recognize this approach and what we can take, what action we can take to this opportunity?

Sri Reddy: Sure, Kevin. One of the basic foundational elements on this, people are underspending because they’re not sure how much they can save once we take out. As a result, they’re only spending earnings or interest you’re leaving a fairly large principal balance behind. The question that you need to work with your client is can they immunize or ensure a portion of the income that they need? Because they can probably buy that insurance through an annuity or a deferred immediate annuity for a whole lot less than they think, which would open up the conversation the remaining balance is for bequest whether its gifting or the inter-generational wealth transfer.

Nora Everett: The other opportunity I see here is multi-generational planning. There’s a real opportunity as you’re creating a strategy for parents to start thinking about how to connect — and connect in really creative ways with that next generation, with their kids, and thinking about that from a teaming perspective. You know who in your office, who in your team can really make that connection with the next generation if it’s not you, but that — and maybe you embed some financial literacy for the kids. But we're seeing, I’m seeing real value in thinking strategically about making connections and developing relationships with that next generation earlier in the process. And making sure you’re doing it in a way that really adds value from the kid’s perspective not just the parent’s perspective.

Kevin Morris: A couple other ones here. Sri, I'm going to tee this one up for you. How can advisors help their clients feel confident spending in retirement?

Sri Reddy: So, Kevin, I think I touched on it briefly addressing inter-generational wealth question. I mean it really is having the focus on a horizon that they can safely plan to. So even if that means we don’t know what longevity is going to be, but let’s plan until you’re 75 or 80 and let’s protect the years beyond that so you can feel secure in knowing that your retirement is covered. I think that’s probably the single best way to generate both sufficient income and have your clients live the lifestyle that they can.

Kevin Morris: Got it. Joe, anything to add there?

Joe Moklebust: Well, in listening to that I think there’s the other issue that obviously we need to address is that retirement income planning doesn’t start and stop at the time you retire. It’s an ongoing process and we need to really be sure we’re working with our clients to help them in that total process — looking at how things are changing in their lives. What needs are changing and addressing those changes. It’s not a one and done kind of operation, it’s an ongoing process.

Sri Reddy: Very well said, Joe.

Kevin Morris: Now, thank you for that. I think as time is — we’re getting towards the top of the hour I think we're going to appreciate everybody’s time with us today. And I appreciate everybody staying on the call today. And appreciate Nora and Sri and Joe's time for us today. And appreciate Natalie for setting this up. And again, as you’re working through these challenges feel free to go to and I appreciate everybody joining us here today and thank you for your time. Thank you very much.

Natalie: Thank you to all our participants for joining us today. We hope you found our webinar presentation informative. This concludes our webinar, you may now disconnect. Have a good afternoon.


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