Appendix D
The Market for Retirement Spending Optimization
Does the Public Know that Retirement Spending Optimization is a Problem?
According to a chart labeled “Importance of selected factors in Social Security claiming decisions” from a report recently prepared by AARP72, 55% of those surveyed said that “Maximizing amount of money that spouse receives after their death” was “very important”, and 28% said it was “somewhat important”.
This indicates that the problem of retirement spending optimization is not a secret to many people in this age group. But how big a group is it? Obviously this is key to understanding the market potential for selling life insurance for such optimization.
Here are a few facts that suggest that the size of this market is very large.
–There are ~75 million Baby Boomers, of whom roughly 2/3 are married (source: http://usatoday30.usatoday.com/news/nation/census/2009-11-10-topblline10_ST_N.htm).73
–Thus, there are ~25 million married Baby Boomer couples.
–Assume 8 million of these couples are both insurable at standard rates or above.
–If the average premium per couple is $2000/year, the total potential premium would be $2000 * 8 million, or ~$16 billion/year.
–If 10% would buy the insurance, we get $16 billion * 10%, or ~$1.6 billion in annual premium.
This suggests that the market for life insurance to help prevent a large drop in retirement income to a widowed spouse due to the loss of the second Social Security benefit should be fairly significant.