A new report from Allianz Global Investors AG, one of the world’s largest asset management companies, provides insight into the effects of the recent financial crisis on U.S. wealth and the transition process that the U.S. retirement landscape is undergoing. The study, "Retirement at Risk: Challenges for baby boomers approaching retirement," examines the retirement preparedness of baby boomers who have seen their assets deteriorate as they approach retirement. The study also highlights the impact that retiring baby boomers – the largest population segment in American history – will have on the financial services industry.

Nearly $9 trillion of private household financial assets has been wiped out by one of the most devastating financial crises in history. Those on the verge of retirement have been most affected by the crisis, as almost half of these losses have occurred in retirement accounts. Due to the shift toward self-directed pension plans, investors are increasingly suffering the consequences of adverse market movements. With 401(k)s and IRAs becoming the dominate retirement savings vehicle in the United States, the priority is now shifting to investment strategies which generate a sustainable retirement income stream from accumulated funds.

Brigitte Miksa, Head of International Pensions at AllianzGI, says, "The recent economic crisis has demonstrated the vulnerability of retirement portfolios, especially of near and post-retirees who won’t have the time to sufficiently recover the losses. The crisis has challenged the system, and combined with the nearing retirement of the baby boomer generation, we now need to find solutions designed for retirement which will be sustainable across various market environments."

"Retirement at Risk II – Challenges for US Baby Boomers Approaching Retirement" investigates the deepened effects of the global economic crisis on the ability of baby boomers to retire over the next two decades. The market dislocation of 2008 significantly affected both high net worth and low net worth individuals, with substantial wealth losses being highest for families at the lower end of the wealth spectrum. In the coming years, baby boomers will be increasingly affected by declines in Social Security benefits and a decreasing share of income from defined benefit pension plans. Therefore, assets invested in defined contribution plans, Individual Retirement Accounts and nonqualified accounts will develop into the major source of future retirement income, leaving individual investors with a need assume responsibility for their retirement income strategies.

The portion of a retirement portfolio earmarked to finance retirement spending needs should be geared toward providing a reliable income stream once an individual stops working. Products and financial advice that are designed to support people in the decumulation phase still need to adapt to this changing environment. Decumulation products must consider and address retirement-specific risks like rising health care costs and inflation. The challenge for the financial services industry will be to develop new solutions and educate advisers on how to best incorporate these offerings into their clients’ portfolios.

Further supporting the findings from this study, a companion survey by U.S.-based Allianz Global Investors Distributors reveals that many investors are overly optimistic about their retirement visions and may need a more realistic approach to retirement planning and investing if their expectations are to be met.

"Despite this refreshing optimism, tremendous damage has been done and Americans now have a lot less accumulated for retirement than they did even a few short years ago," said Brian Gaffney, CEO of Allianz Global Investors Distributors. "Our survey reveals a need for all of us to honestly reassess our vision of retirement and to develop realistic and sustainable retirement savings models. It’s important that we take to heart the lessons learned during this financial crisis and make small changes now to improve our likelihood for a secure retirement in the future."