Facing longevity risk has always been a trending issue in the retirement industry. Now, in times of inflation and market uncertainty, the topic has gained even more traction, finds new research from LIMRA.
According to the data, close to half of workers say they do not believe their households will receive enough lifetime-guaranteed income to cover their basic living expenses in retirement. Six in 10 Americans say they are confident their savings and investments will at least last until age 90.
Of future retirees, only 44% expect to receive enough income from Social Security, traditional defined benefit (DB) pension plans, and/or lifetime-guaranteed annuities to cover their household’s basic living expenses. This leaves over half of future retirees to use their savings to pay these expenses.
This is the fourth time LIMRA research has seen a drop in the number of pre-retirees who believe they will receive enough income to cover living expenses, from 58% in 2017 to 44% in 2022.
Of the top three retirement income scores, Social Security placed first with 64% of pre-retirees seeing it as a key source in retirement. Sixty-one percent of pre-retirees say their defined contribution (DC) plan will serve as a top source, and 43% believe their personal savings will be a significant source of income. Other forms of income included traditional individual retirement accounts (IRAs) (39%), traditional defined benefit (DB) pensions (27%), Roth IRAs (20%), part-time job earnings (10%), annuities (10%), full-time job earnings (8%), and other sources (2%).
Lack of pensions contribute to insecurity
LIMRA’s research suggests that the trend away from traditional pensions may contribute to the lack of confidence among pre-retirees. According to the data, less than a quarter of workers under 50 will have access to a pension once they retire.
“The ongoing decline in pensions could partly explain why workers feel they will not have enough income, but other factors like uncertainty about Social Security benefits, market volatility, and the rising cost of living, are undoubtedly playing a role,” according to Matt Drinkwater, corporate vice president of Annuity and Retirement Income Research at LIMRA, in a statement.
More money leads to higher confidence
Americans who make more money were less likely to indicate any lack of confidence, finds the LIMRA research. Fifty-one percent of consumers with $2 million or more in household investable assets said they were confident their savings and investments would not run out if they lived to age 90, compared to just 12% of investors with $100,000 to $249,000 in assets.
LIMRA surveyed Americans ages 40 to 85 with at least $100,000 in household investable assets. Additional findings can be found here.
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