Retirees Need to Take Risks

NEW YORK ( TheStreet) -- U.S. adults nearing retirement are increasingly nervous about their ability to live comfortably in retirement, but that doesn't mean they're going to take big risks with their money to pad their bank accounts.

According to the Employee Benefit Research Institute, just 13% of U.S workers and 18% of actual retirees are "very confident" they'll have enough cash to retire in relative comfort. Another 49% of adult Americans say they are not confident.

"Not only do workers lack confidence about their ability to secure a financially secure retirement overall, but more and more they lack confidence in their ability to pay for medical expenses and even basic expenses such as food, clothing and shelter," says Jack VanDerhi, research director at EBRI.

Americans seem so down on their retirement prospects that they're afraid to risk money in the stock market.

Allianz Life Insurance research shows U.S. adults between ages 55 and 65 want their money "protected" as they near retirement and avoid the stock market to keep the money they have accumulated safe and sound.

Fifty years ago, this wouldn't have been big news. But Americans are increasingly living to 90 -- or even 100. With most retiring at 65 or 70, that leaves several decades to account for from a retirement savings point of view. That makes avoiding stocks not the smartest move.

Look at it this way. Last year stocks returned 15.93% on investments, compared with the 2.97% coming to investors in 10-year U.S. Treasury Notes. Since 1928, a $100 investment in stocks would have returned $193,219, compared with $6,926 for 10-year bonds.

But Allianz says Americans nearing retirement prefer safer, more guaranteed investments.

In its Transition Boomers and Retirement Income Survey, Allianz says that "resoundingly," Americans prefer an investment with guaranteed returns rather than to risk their money in the stock market.

The study says that 87% of baby boomers surveyed said they prefer an investment vehicle with a 4% guaranteed return over an investment vehicle with an 8% return that could lose value if the stock market declines.

That's no easy task, Allianz states.

"Our survey was taken when record stock market performance was generating daily headlines, showing that, regardless of how hot the markets are, Transition Boomers still crave protection for their retirement savings," says Walter White, president and CEO of Allianz Life. "There are financial products that can deliver these benefits, but the industry needs to do more to educate these Transition Boomers about them."

Baby boomers may not be viewing the issue clearly.

In the study, the most common financial objective for boomers was increasing their savings rate. Yet by favoring guaranteed investments such as bonds and annuities (which Allianz sells in big numbers) and bypassing stocks, Americans are virtually guaranteed to come up short on their retirement savings objectives.

If history is any indication, that attitude is going to have to change if boomers want to retire comfortably. That's no knock against bonds or annuities, but there has to be room in a retiree's portfolio for high-rising stocks as well.