Data & Research October 11, 2011

One Third of Americans Don’t Know Retirement Income Needs

In an Edward Jones survey, 34% of Americans said they don’t know what percentage of their savings they will need to withdraw annually in retirement to maintain their lifestyle.
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More women than men were uncertain about their anticipated retirement spending; 38% said they didn’t know how much they would need, compared with 30% of men.  

The survey of 1,011 respondents showed that 22% of Americans think they will need to use more than 10% of their retirement savings each year. Age influenced this, as 33% of those between the ages of 35 to 44 expect to spend the same percentage on a yearly basis once they stop working. A smaller number of retired Americans (15%) believe they will need to withdraw more than 10% of their savings compared with 25% of those who are currently not retired.  

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In contrast to older generations, younger Americans (18-34 year olds) said they do not believe their retirement will be costly, as 19% said they plan to withdraw one to two percent annually from their retirement savings. 

Other key findings from the survey included: 

  • Forty-four percent of Americans expect to spend less than 10% of their retirement savings each year. This decision was influenced by gender as 50% of men polled indicated the same compared with 37% of women. 
  • Regionally, respondents differed on their retirement spending outlook. Twelve percent and 11% of Americans in the Northeast and West, respectively, expect to spend more than 20% of their retirement savings on a yearly basis. In contrast, a higher percentage of respondents in the South (49%) and Midwest (46%) expect to withdraw less than 10% of their retirement savings each year. 
  • Household income significantly influenced retirement spending expectations as 50% of Americans with a household income of more than $100,000 plan to spend less than 10% of their retirement savings each year. Comparatively one-third of those with a household income of $35,000 to $50,000 expect to spend more than 10% annually.
Data & Research October 11, 2011

Report Says Demand Growing for Guaranteed Income

A joint report from the Insured Retirement Institute (IRI) and Cerulli Associates concludes that variable annuities can provide advisers flexibility in creating a retirement income strategy for clients.  
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The report, “2011 Portfolio Construction Dynamics,” explores challenges advisers face in generating a portfolio that can produce income throughout their clients’ retirement.  IRI and Cerulli contend that dedicating a portion of a client’s withdrawal or income floor to a guaranteed income stream increases their chances of success of the overall portfolio.

The report also found that:

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  • Independent and insurance broker/dealers are the strongest sales channels for variable annuities.
  • Advisers anticipate changes to their practice as a result of the increased need to aid clients in generating retirement income.
  • Advisers expect an increase in the number of clients and revenue, as well as the need to use a broader range of investment vehicles to meet retirement income goals.
  • Advisers are continuing to move to more widespread use of managed products.

“IRI research shows that the number one retirement savings concern among Boomers is that they will outlive the funds they have accumulated for retirement,” said Cathy Weatherford, IRI President and CEO.  “Insured retirement strategies can help provide the security Boomers are looking to provide dependable, guaranteed income throughout their retirement.  And based on the findings of this recent report, advisers looking to diversify their clients’ portfolios should consider variable annuities as a baseline income investment in their clients’ retirement plan.”

More findings from the report are available here.   

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