QLAC Interest Varies by Age, Income

By Nevin Adams • 5/7/2015 • 0 Comments

Apparently the poorer and younger you are, the more likely you are to be interested in a QLAC. But if you have a retirement plan of any kind, not so much.

In a presentation at the International Foundation of Employee Benefit Plans, Jack VanDerhei, research director at the nonpartisan Employee Benefit Research Institute (EBRI), noted that while interest in a qualifying longevity annuity contract, or QLAC, peaked at about 63% for workers 45 or younger, fewer than four-in-ten over age 45 expressed interest, except among those with less than $20,000 in household income. The calculations were based on VanDerhei’s tabulations from the 2015 Retirement Confidence Survey findings sponsored by EBRI and Greenwald & Associates. Previous EBRI calculations, presented again at the IFEBP event, indicated that QLACs increase the Retirement Readiness Ratings (RRR) by as much as 9.6% for Gen Xers in the longest relative longevity quartile. 

Longevity perceptions also made a difference in QLAC interest: Nearly twice as many of those who thought it was very likely they would live till at least age 85 were interested in QLACs, as among those who believed it was not at all or not too likely (47% versus 25%). Somewhat surprisingly, while one might expect that interest gap to close as individual longevity expectations rose, the gap held up even among those who thought it was very likely they would live till 95 (53% versus 30%).

Social Security’s ‘Blanket’

Another factor was belief in whether Social Security would be a major source of income in retirement or not, though once again younger individuals were more interested than their elder counterparts. And while there was some significant differences in QLAC interest among younger workers depending on their perspective on Social Security’s contribution to their retirement income, that didn’t seem to have much impact on older workers. For example, among those who thought Social Security would be a major source 40% of those under age 45 expressed interest, as did 47% among those who thought it would be a minor source, and 59% of those who thought it would not be a source.

In contrast, among those over age 45 who thought Social Security would be a major source, only 31% were interested — nearly identical to the 34% of those in that age group would thought it would not be a source.

The interest gaps were smaller among those who had a retirement plan, though overall, respondents who had a retirement plan — defined contribution, IRA, or defined benefit — were less interested in a QLAC than those who had no retirement plan. Nearly half (47%) of those with any retirement plan were not interested (39% were interested).

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