Risk Averse Boomers

[mickeyd]

Perhaps my fellow boomers need to read up a bit about risk and all of it's many benefits. Maybe they don't recall all of those risky moves that they made on the backseat of that old '55 Chevy making out with Mary Lou. Some risk is a good thing. It pays off in the long run, they say.

Survey respondents were given a choice between a financial product with a 4% return that is guaranteed not to lose its value and one with an 8% return that is subject to market risk and loss of principal. Seventy six percent of respondents chose the guaranteed product, a percentage that was down just a bit from the 80% rate in the 2010 survey.
Allianz’ original “Reclaiming the Future” survey last year was conducted among more than 3,200 people between the ages of 44 and 75. This year’s follow-up surveyed 439 of the same participants in March of this year, when the Dow Jones Industrial average reached its highest point in nearly two years.
"We were definitely surprised that the feelings of fear and unpreparedness in 2011 were nearly identical to those from last year," says Libbe.

baby boomers fearful of retirement prospects, boomers avoiding risk in the market, financial crisis and the impact on boomers retirement savings - Financial Planning

 

[chinaco]

Often, SPIAs are not compared to securities with somewhat similar risk profiles which (IMO) lead to a bit of an apples and oranges type of debate. If one compared them to a portfolio of high quality bonds... (IMO) the comparison would be more valid than a portfolio of stocks or stocks and bonds.

 

[rescueme]

Often, SPIAs are not compared to securities with somewhat similar risk profiles which (IMO) lead to a bit of an apples and oranges type of debate. If one compared them to a portfolio of high quality bonds... (IMO) the comparison would be more valid than a portfolio of stocks or stocks and bonds.

My take away from the article (being that I/DW have an SPIA) is that those that have at least a base income (provided by the SPIA) feel more confident in taking more risk with their portfolio.

It's no different than many folks on this board that have a guaranteed income due to government jobs or professions that provide DB plans (such as teachers). In some cases, SS is also added to that guaranteed income, which would tend to allow those folks to be more agressive and take more risk with their retirement portfolio - quite unlike those that have no options to them other than to use their portfolio for retirement income (which was the case for me).

Those that have a DB pension, along with SS may not need to consider an investment vehicle such as an SPIA. However, for those that "go commando" in early retirement (as I did), an SPIA gives you an alternative to have a self-made pension, which in turn may allow you (as it did in our case) to be a bit more acceptable to higher risk in our retirement portfolios.