Pre-retirement baby boomers, sitting on a growing pile of savings, represent a tough but potentially lucrative market for financial products designed to help them repair damaged nest eggs and hang on to what they’ve got.
That’s one conclusion of a four-nation survey (PDF) conducted this winter, and released by Minneapolis-based Allianz Life in conjunction with its parent, German financial services giant Allianz SE.
A survey of households in the United States, Germany, France and Italy also found that U.S. consumers “are reacting most profoundly to the [financial] crisis. Almost half of them responded that they have to revise their living standards, i.e., reduce their spending and save money in a low-risk way.”
“We have witnessed a surge in the saving rate since early 2008,” said Allianz SE Chief Economist Michael Heise. The company predicts that the sharp decline in U.S. households’ net worth over the past two years will trigger a lasting increase in the saving rate to 6 percent. “We anticipate that products, such as mutual funds, annuities and equities, will benefit from this change,” he added.
The collapse of the equity markets and home values has destroyed $11 trillion to 12 trillion of household wealth, Allianz economists estimated, even after the stock market rally of 2009.
After the financial meltdown, consumers reversed direction and sent personal savings rates sharply higher throughout 2009, leading Weise to predict the overall level of U.S. household savings to rise to 6 to 6.5 percent, or more than $700 billion annually.
That would be a big jump from 4.8 percent, the most recent personal saving measure from the U.S. Bureau of Economic Analysis. Those statistics showed personal savings rose to $534.2 billion in December, compared with $506.3 billion, or 4.5 percent, in November. In the first quarter of 2008, personal savings totaled $126.3 billion, barely 1 percent of income.
Asserting that U.S. consumers are particularly shy of risky assets, the survey also found that consumers in the new economic landscape also are seeking greater value for their money and are spending a lower percentage of income on financial products as they pay down debt. In the process, they are demanding greater transparency from financial services companies, both banks and insurance companies.
Pre-retirement boomers represent a key target, according to the study, because they will be rolling over substantial amount of savings accumulated in 401(k) retirement accounts and will seek to preserve their funds.