July 25, 2016

Without Pay Raises, Americans See Peril of Living on a Fixed Income in Retirement

MINNEAPOLIS – July 25, 2016 In order to help address the risks caused by inflation, many Americans are looking to financial products that not only provide guaranteed income in retirement, but also offer the opportunity for their income to increase, according to a new study* by Allianz Life Insurance Company of North America (Allianz Life®) that explores Americans’ perceptions of the rising cost of living. While eight out of 10 respondents expressed interest in a product that offers income for life, an even higher percentage (86%) said they had interest in a product that offered guaranteed income for life plus the opportunity for income to increase over time. 

Similarly, when presented with two options for guaranteed income – one that pays a higher income rate to start but has no opportunity to increase over time and one that starts with a lower income rate but offers the possibility of increases – more than three-quarters (77%) indicated an interest for the increasing income option. Furthermore, half (50%) of respondents said they feel that it is “very” or “extremely important” for a product to offer the possibility for income increases over time.

“Our study revealed that many people depend on an annual pay raise to cover various increasing expenses and even build long-term savings,” said Allianz Life Vice President of Consumer Insights Katie Libbe. “Consumers facing retirement will need to explore options that create a similar income strategy by using a portion of their portfolio to obtain guaranteed income for life with the chance for increases.”

Without Pay Raises, Rising Costs Bring Panic
Annual pay increases are an important part of maintaining financial security for many Americans. In fact, more than two thirds (67%) of those surveyed said they received a pay raise at least half of the time during their working years. Yet, if faced with a frozen income that offered no chance for an increase in annual salary, 53% said they would be very worried or even panicked as to how they would pay for everyday expenses.

Considering the critical role pay raises can play in a person’s ability to manage rising costs as they work, this scenario provides a compelling glimpse into the situation faced by many retirees living on a fixed income. In addition to expressing concern that inflation will affect their overall retirement plans, when asked how they expect the rising cost of living will affect their retirement lifestyle, nearly one-third (28%) of those surveyed said they worry that they won’t be able to pay for the essentials including basic needs such as housing, food and medical care. This was an even greater concern for those with a lower income as 41% of people earning less than $50,000 indicated they would worry about paying for essentials.

“Clearly, there is strong consumer appetite for both guaranteed income and increasing income solutions in retirement,” adds Libbe. “It’s important that these benefits are available so Americans can have more confidence in their ability to manage rising costs when pay increases are no longer an option.”

Delivering on Increasing Income
Recent research on Allianz Life annuities that offer income benefits – either built-in or through an optional rider at an additional cost – provides evidence that those products have delivered income increases to many customers**:

  • On average, income from Allianz Life fixed index annuities not only helped address inflation, but purchasing power actually increased over time.
  • 93% of clients who are receiving income from these fixed index annuities received an increase.
  • 67% percent of these clients received a payment increase every year.

For more information about the increasing income potential available through Allianz Life fixed index and variable annuity products, visit www.allianzlife.com/annuities/increasing-income-potential.

About Allianz Life Insurance Company of North America
Allianz Life Insurance Company of North America, one of FORTUNE’s 100 Best Companies to Work For in 2016, has been keeping its promises since 1896. Today, it carries on that tradition, helping Americans achieve their retirement income and protection goals with a variety of annuities and life insurance products. In 2015, Allianz Life provided a total of $2.4 billion in benefit payments that supported policyholders’ financial objectives. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with 142,000 employees in more than 70 countries worldwide. More than 85 million private and corporate customers rely on Allianz knowledge, global reach, and capital strength to help them make the most of financial opportunities.

*The Allianz Life 2016 Inflation Study was conducted by Ipsos via their eNation Online Omnibus in March 2016. The survey was completed via Ipsos’ iSay/Amario Panel with 1,005 U.S. adults age 18+, and was commissioned by Allianz Life.

** Past income increases are not a guarantee of future income increases.



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