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Study by LIMRA. Society of Actuaries and InFRE reveals the ongoing impact of the 2008 economic downturn on the financial outlook and financial planning behavior of retirees

WINDSOR, Conn., ANN ARBOR, Mich. and SCHAUMBURG, Ill., Nov. 16, 2011 — American retirees are feeling more financially secure since 2009, but fewer have estimated how long their assets will last into retirement, according to a study conducted by the Society of Actuaries (SOA), LIMRA and the International Foundation for Retirement Education (InFRE).

“The Financial Recovery for Retirees Continues” is the third in a series of studies looking at the impact of the 2008 economic downturn on retirees’ finances. The June 2011 survey explored the opinions of 461 retirees who were in the original 2008 and 2009 studies.

The most recent survey found that fewer retirees reported feeling less financially secure now than when they first retired (28 percent in 2011, 49 percent in 2009). The study reveals that retirees’ confidence levels are approaching levels recorded before the 2008 downturn, when only one-fifth of retirees reported feeling less financially secure than when they first retired.

The new study also found that retirees have been paying down their debt, with 46 percent of respondents in the 2011 study having no debt compared to 38 percent in 2009. While this might boost feelings of financial security, the fact that an increasing proportion of retirees are not estimating how long their assets might last in retirement (46 percent in 2011 from 38 percent in 2008) is a concern for financial professionals. In fact, the number of retirees acknowledging their assets and investments need to last at least 20 years has declined 20 percentage points since 2008.

“We’re surprised by the number of retirees who have not considered how long their assets and investments might last given the market volatility of recent years,” said actuary and retirement expert Anna Rappaport, FSA, MAAA, who serves as chairperson of the Society of Actuaries’ Committee on Post-Retirement Needs and Risks.

When it comes to risk tolerance, 74 percent of retirees who manage their own investments describe themselves as conservative, and the vast majority of all retirees (93 percent) is confident in their investment strategies. “Our research shows that the financial downturn has not had a lingering affect on how many retirees feel about their current financial security compared to when they first retired,” said Sally Bryck, associate research director, LIMRA.

The study found that individuals who have calculated how long their money might last in retirement are more confident they have saved enough money to live comfortably than those individuals who have not. The research also indicated that 61 percent of retirees have someone they consider to be their personal financial advisor, and that retirees with financial advisors are more likely to engage in financial planning.

“This research emphasizes the importance of retirees educating themselves on how to successfully plan for their retirement years, while understanding the value of partnering with a trusted financial advisor for guidance,” observed Betty Meredith, CFA, CFP, CRC, director of education and research, InFRE.

Other key findings from the 2011 study include:

• The proportion of retirees having to use savings to pay for basic living expenses in excess of income from Social Security and/or defined benefit plans has been stable over time (44 percent in 2011 compared with 45 percent in 2008).
• There continues to be little interest in purchasing annuities among retirees who do not receive enough income to cover basic living expenses (32 percent in 2011 compared with 30 percent in 2008).
• Retirees with financial advisors tend to have larger amounts of investable assets than those without advisors, and follow their advisors’ advice all or most of the time (74 percent).

“It will be interesting to see if there is a long-term impact from the economic turmoil of the last few years, especially for those depending on the value of their home to fund retirement,” said Bryck. “The retirees surveyed are not appearing to make changes to their stock market investments, but they have become more risk adverse and conservative in spending.”

To read the full study, “The Financial Recovery for Retirees Continues,” visit here.

Contacts:

Kim McKeown, Society of Actuaries
847-706-3528
kmckeown@soa.org
 
Donna G. Sullivan, LIMRA
860-285-7875
dsullivan@limra.com
 
Catherine Theroux, LIMRA
860-285-7787
ctheroux@limra.com

About the Study

“The Financial Recovery for Retirees Continues” is a study of 461 retirees aged 55 to 75 with $100,000 or more in investable household assets in 2008, highlighting changes in retirees' attitudes from 2008 to 2009 to 2011. The study was conducted by the Society of Actuaries (SOA), LIMRA and the International Foundation for Retirement Education (InFRE) to measure the effects of the financial downturn on retirees’ finances. The organizations followed up with respondents of a 2008 study in 2009 and again in 2011, to investigate how these same respondents have been reacting to the long-term effects of the 2008 market downturn and the continuing financial upheaval. The complete 2008 report “Will Retirement Assets Last a Lifetime?” and 2009 report “What a Difference a Year Makes” can be found here.

About LIMRA

LIMRA is a worldwide research, consulting and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness. Visit LIMRA at www.limra.com.

About the Society of Actuaries

The Society of Actuaries is an educational, research and professional organization dedicated to serving the public, its members and its candidates. The SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk. For information, visit www.soa.org.

About the International Foundation for Retirement Education

The International Foundation for Retirement Education (InFRE) is a 501(c) (3) organization devoted to enhancing the retirement preparedness of middle-income Americans. To date, over 2,000 professionals have met the accredited Certified Retirement Counselor® (CRC®) certification eligibility and testing requirements. To learn more about the CRC® and other retirement-specific education and training resources, visit www.InFRE.org.