New study: Consumers adopt “if not now, when?” mindset for financial planning

There’s no doubt that the current financial markets, persistent inflation, and stomach-churning questions about what happens next in our economic world are issues that are top of mind for all of us.  In a timely new study recently released by Lincoln Financial Group, consumers surveyed say that they are trying to better understand ways to survive the current economic climate, but – probably of little surprise to those of you who are calling on them on a regular basis – there is some hesitancy about taking steps to address it.

In a recent news release highlighting the study, Lincoln Financial addresses the importance of consumers adopting an “if not now, when?” financial planning mindset. In particular, the company emphasizes how often the living benefits of life insurance can help address the challenges of today, including inflation, market volatility, and potential tax changes.  The company also addresses how too many of these living benefits are either misunderstood or are completely unknown by the consumers who could most benefit by using them.

“Nearly 70% of life insurance owners surveyed say they feel financially secure compared to 47% of non-owners, yet just half of American adults have any type of life insurance coverage,” said Matt Grove, executive vice president and head of individual life & annuities and Lincoln Financial Network. “Life insurance can help provide families financial security, as it’s done during the pandemic, and offers the flexibility to address some of the economic challenges we face today, like volatility and inflation. While people often know about the importance of life insurance death benefits, the ‘living benefits’ are often overlooked. Times like these should be a call to action to speak with a financial professional, evaluate your plan and your options, and prepare for the future today.”

This survey shows that inflation is the primary personal financial concern of consumers, with about two-thirds of those surveyed reporting that they feel concerned, and 61% saying they’re more concerned as a result of the current environment. Stock market volatility is also a huge issue, with 43% saying it is a concern and 37% saying they’re more concerned as a result of the current market. 

In addition, having enough income during retirement is the second-most cited concern of those surveyed, with the issues of having enough money to cover large purchases or expenses and outliving money saved also being high on the list.

But here’s the rub, and potentially where you come in. Despite more than 80% of consumers surveyed saying that they want to better understand ways to protect against inflation and market volatility, only about one in five have reviewed or made changes to investments or financial plans to address either of those major issues. As savvy advisors and marketers alike well understand, life insurance can help address the impacts of inflation and volatility, with certain policies offering the following:

  • Access to cash value in the policy for needs such as funding a child’s college tuition or supplementing retirement income.
  • Investment accounts, including indexed accounts to pursue market upside with downside protection.
  • Optional features to protect against cost-of-living increases by automatically growing the policy’s coverage each year.

Another issue that is top of mind for survey respondents is the potential for tax changes, in particular, any changes related to retirement planning. More than one half of consumers surveyed by Lincoln Financial are concerned about how tax changes might impact their ability to live off retirement savings, retirement income, and lifestyle. In addition, 46% say they are concerned how tax changes may impact estate plans and beneficiaries. Even though 43% of respondents report that they are not prepared for estate taxes, and 32% responded that they are not prepared for income taxes in retirement, less than 30% of those responding say that they have ever spoken to a financial professional about ways to minimize exposure to taxes in their investment or retirement accounts. 

This is an important need that we, as an industry, are clearly not addressing as effectively as we could. As we know, taxes are yet another financial planning challenge that life insurance can help address, including the following:

  • Tax-deferred cash value growth opportunities.
  • Income tax-free death benefits passed on to beneficiaries.
  • Tax-advantaged charitable giving options.
  • Effectively and efficiently transferring an estate from one generation to the next.

Yet one more area where Lincoln Financial’s report reveals a need with which life insurance can help is with issues that face employers.  The press release notes that in today’s competitive hiring market, life insurance can play an important role in attracting, retaining, and rewarding employees and ensuring that a business continues into the future. Lincoln Financial research reports that 77% of employees see insurance benefits other than health insurance as a must have or very important when deciding to take a new job.

Small businesses are part of that equation, with 28% of small business owners surveyed saying that they are now offering stronger employee benefits to attract and retain talent as a result of the pandemic — and life insurance is the top benefit they report adding. Only 22% of small business owner respondents, however, have had a discussion with their financial professional about protecting against the loss of key people, only 37% say they offer life insurance as part of executive incentive packages, and only 43% have a formal transition plan that includes a financial strategy, which as we know life insurance can help address.

“In the current hiring market, business owners are recognizing the value a comprehensive benefits package has in attracting and retaining top talent,” said James Reid, executive vice president, head of workplace solutions. “And life insurance is more important than ever, as employers look to offer options that give peace of mind to their employees by ensuring they can protect their loved ones.”

So whether you’re advising business owners, families, or both, you can help bring some certainty to some very uncertain financial times.  But you’ve got to start initiating those important conversations. 

Charles K. Hirsch, CLU, is the president of Hirsch Communications Consulting, LLC, a communications consulting operation in Florissant, MO. For many years, Chuck was the editor and publisher of Life Insurance Selling magazine and has published several of the leading life insurance industry magazines. He continues to contribute articles on a regular basis to industry publications, in addition to providing a wide range of writing, editing, content development, and marketing services through his firm. He is a regular contributor to NAILBA Now e-Newsletter as well as to Perspectives magazine.