WINDSOR, Conn., Apr. 18, 2011 — More than half of retirees, ages 55-79, fear that changes to the Medicare, Social Security programs as well as increases in taxes will affect their ability to afford their plan for retirement, according to new LIMRA research presented at the 2011 Retirement Industry Conference.
“These concerns, as well as inflation, are top of mind for all retirees but especially true for those with the lowest incomes and assets, who can least absorb additional unexpected costs during retirement,” said Marie Rice, corporate vice president, LIMRA Retirement Research. “With so many lawmakers talking about cutting costs to reduce the growing deficit and the financial implications resulting from it, retirees who might have felt secure that their retirement savings would last their lifetime, now recognize the uncertainty of the times and how vulnerable they are.”
The study examined retirees’ income sources and how that income is spent. As expected, more than 85 percent rely on Social Security and three quarters benefit from a traditional pension plan for their income. Forty-four percent of retirees listed investments and taxable savings as an income source; 35 percent an annuity (8 of 10 have a deferred annuity); and about a fourth mention employee earnings, defined contribution plans and IRAs funding their retirement income. More than half of their income is used to pay for basic living expenses.
“A significant change in public policy like Social Security and Medicare benefits could be disastrous for many retirees – particularly those with lower income and asset levels,” noted Rice. “For future retirees who will likely not have a pension plan to rely on, it will be important that they increase their current savings patterns and think about retirement income solutions including guarantee investments that will adjust for inflation. Our industry is uniquely qualified to provide solutions to protect retirees and help them achieve their financial goals.”
The study also found that less than half of retirees worked with a paid professional advisor to make investment decisions and only 22 percent had a formal written plan. Prior LIMRA research has discovered that retirees who have a formal written plan are far more confident in their financial well being than those who don’t.
“Our industry has tools and guidance available to those who seek it,” continued Rice. “Especially during Financial Literacy Month, it is important we, as an industry, redouble our efforts to engage and educate Americans about the importance of adequate savings behaviors and sound retirement planning and the repercussions to those who fail to do so.”
The 2011 Retirement Industry Conference, hosted by LIMRA, LOMA and the Society of Actuaries (SOA), attracts more than 400 retirement industry professionals from companies across the globe to gain insights on the latest industry developments and equip themselves with solutions to address the complex challenges they face every day.
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.