Innovation, Cybersecurity, and Technology (H) Committee
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McCormick Place Convention Center—Grand Ballroom—Level 1
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Retirement Security
Background
Last Updated 7/26/2024
Background: Retirement security is a major national concern in the U.S. with significant impacts for the insurance sector. Whether starting a career or counting the days to retirement, financial and insurance planning should be a priority for Americans of all ages. Retirement security encompasses a broad spectrum of financial tools, including many insurance-related products and services such as life insurance, annuities, and long-term care insurance. The marketing and sales of these products are also areas which fall under the retirement security umbrella. State insurance departments and the NAIC can play an important role in helping American consumers prepare for financial security as insurance is a key part of a comprehensive retirement plan.
Advances in healthcare have led to longer life expectancies. At the same time, many employers have moved away from defined benefit pension plans toward defined contribution plans such as a 401(k). As such, the responsibility for funding and managing retirement assets has shifted solidly to the consumer. This is a daunting task for many Americans. The impact of inflation on retirement savings is increasingly evident, posing a significant risk to their adequacy.
Americans face significant obstacles in preparing and saving for a financially secure retirement. Many Americans are dramatically under-saved. According to a report by the Insured Retirement Institute, only 54% of Baby Boomers have any retirement savings at all. Moreover, only a quarter of Baby Boomers are confident their savings are sufficient to carry them through all their retirement years. Financial literacy skills are lacking for many, leaving them unprepared to accumulate and manage the substantial assets necessary to assure a comfortable retirement. Interestingly, a 2017 Mercer report found “financial courage” leads to better individual outcomes than even financial literacy.
Insurance products can play an important part in overcoming these challenges. Life insurance proceeds can potentially help a beneficiary enjoy a financially secure retirement by replacing years of retirement savings cut short by a premature or unexpected death. Annuities, while not suitable in every situation, can provide a guaranteed income stream in retirement for some consumers. Additionally, many Americans over the age of 65 will require long-term care (LTC) services in their lifetime, and long-term care insurance products can be an effective hedge against the high costs associated with this kind of commonly needed care.Bolstering financial literacy and accessing educational resources are key strategies that can enhance the planning and management of retirement savings, ensuring long-term financial well-being.
Actions
Actions: In 2019 the NAIC established the Retirement Security (A) Working Group to develop an education campaign and curricula, anti-fraud alerts, and other work products to support and promote retirement security. The group disbanded in 2020, but the Life Insurance and Annuities (A) Committee and its related groups continue to monitor developments in this area.
The NAIC reviews and updates NAIC model laws and regulations, particularly in the area of annuities, to ensure they continue to meet public policy needs. In 2016, the NAIC launched a national Life Policy Locator Service in 2016 to assist individuals in locating life insurance policies, especially in cases where the requestor or beneficiary has little to no information about the policy. The consumer tool matched 8,210 beneficiaries with lost or misplaced life insurance policies or annuities, totaling $92.5 million returned to consumers, in its first year alone.
The Long Term Care Insurance (B) Task Force is charged with monitoring the LTCI market, including options to help consumers manage the impact of rate increases. The Senior Issues (B) Task Force considers policy issues and regulatory standards for insurance issues affecting older Americans.
The NAIC’s Producer Licensing (D) Task Force and its related groups are charged with monitoring continuing education requirements for insurance producers to ensure appropriate knowledge in order to advise customers.
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Media queries should be directed to the NAIC Communications Division at 816-783-8909 or news@naic.org.