|
E-mail this page to a friend!
Senior Citizens Confident Assets Will Carry Them in
Retirement to Age 85
Leaving an inheritance is not a priority for the
Silent Generation
June 21, 2005 The vast majority of senior
citizens between the ages of 59 and 71 are confident that have enough
money to live comfortably until at least age 85. This study released
today refers to this group as the Silent Generation and gauges their
income and spending patterns in retirement.
Eighty-three percent of pre-retirees and 90% of
retirees expressed confidence in their resources carrying them to 85,
according to the MetLife Retirement Income Decisions Study: The Silent
Generation Speaks.
The study found that fixed sources of income are
very important for the Silent Generation when deciding how much they can
spend during retirement.
The majority of those in the Silent Generation
have, or anticipate, multiple sources of guaranteed income to carry them
through retirement, including Social Security (79% retirees, 91%
pre-retirees) and company pension plans (69% retirees, 71%
pre-retirees), as well as annuities.
Nearly one-third (31%) of retirees surveyed say
that they receive retirement income from annuities and half of
pre-retirees (50%) expect income from annuities in their first year of
retirement.
Interestingly, retirees who had regular income from
both a pension and an annuity were three times as likely as those with
neither to say that retirement is much better than they expected it
would be.
"The Silent Generation spent their working years
during an era that was generally more stable for employees and they are,
perhaps, the last generation that will, as a group, have a fairly strong
sense of confidence about security in retirement," said C. Robert
Henrikson, president and chief operating officer of MetLife, Inc. "Many
of them are able to rely on Social Security and pension plans as a
stable source of income; however, most Baby Boomers won't have that
luxury. Future retirees will need to seek out new sources of guaranteed
lifelong retirement income, such as annuities."
Inheritance Not a Priority for the Silent Generation
Defying assumptions that the Silent Generation will
carefully budget for and leave an inheritance to their children and/or
grandchildren, most of the "Silents" view leaving an inheritance to
someone other than their spouse as relatively unimportant. Fewer than
half of Silent Generation retirees (45%) and pre-retirees (43%) say that
it is important to leave an inheritance to anyone other than their
spouse.
"With less replacement income from Social Security,
a smaller likelihood of receiving a defined benefit pension plan and
decreased chances of receiving an inheritance from their parents, how
will the Baby Boomers and other cohorts, such as Generations X and Y,
budget their money during retirement to ensure that it does not run
out?" asks Sandra Timmermann, gerontologist and director of the MetLife
Mature Market Institute. "Hopefully, the Silent Generation pre-retirees
and retirees whom we surveyed, whose savings patterns put them in the
upper half in financial assets, will serve as role models for future
generations."
A Delicate Balancing Act
While the Silent Generation in this report has
carefully saved for retirement, many pre-retirees and retirees are not
as informed as they should about their longevity risk and have not taken
steps to ensure that they will have enough money to last throughout
their lifetime. One-third (34%) of pre-retirees have not calculated how
much monthly income they will need in retirement. A larger percentage of
pre-retirees (45%) and retirees (47%) have not estimated the annual rate
of inflation over the next ten years.
One reason for the Silent Generation's failure to address longevity risk
may be their tendency to focus on short-term rather than long-term
issues. While many of the pre-retirees and retirees surveyed worry at
least once a month about a rise in the cost of medical care (50%
pre-retirees, 40% retirees) and a drop in the stock market (44%
pre-retirees, 39% retirees), fewer are concerned about longer-term
problems such as the possibility of outliving their retirement savings
(19% pre-retirees, 16% retirees) or needing to provide care to a family
member who becomes chronically ill (24% pre-retirees, 22% retirees). In
fact, one-third of retirees (37%) never worry about running out of money
in retirement and another 35% worry about this less than once a year.
"As Americans live longer and healthier lives, the
challenge for every generation is to make sure their money lasts as long
as they do," said Mathew Greenwald of Mathew Greenwald & Associates,
Inc., which conducted the study on behalf of the MetLife Mature Market
Institute. "This requires a delicate balancing act between income and
spending - choosing the right portfolio, getting protection against
retirement risks such as market risk, inflation risk and longevity risk,
and choosing a level of spending that will allow assets to last."
Among other key findings from the MetLife
Retirement Income Decisions Study:
-- Silent Generation Overestimates Income,
Underestimates Expenses in Retirement
Nearly two-thirds (63%) of Silent Generation
pre-retirees expect to spend less in retirement than they did during the
years leading up to retirement, yet most retirees (51%) say they spend
about the same and 19% spend more. On the income front, nearly half
(48%) of the pre-retirees who anticipate receiving Social Security
expect their Social Security payouts to equal 30% or more of their
pre-retirement income, yet among retirees who receive it, only one-third
(37%) currently receive payouts of this size. According to the Social
Security Administration, the average Social Security payment for 2005 is
$955 month. In addition, of those who can estimate their investment
returns, one-third of the "Silents" plan for a return on their
investments of 9% or more, a figure that most financial professionals
feel is highly unlikely.
-- Annuity Purchasing Trends
Over half of Silent Generation pre-retirees (55%)
and retirees (53%) have part of their assets in annuities. The vast
majority of these annuities - about nine in 10 - are deferred, from
which the individual did not initially receive monthly income. One
quarter (26%) of the retirees who have deferred annuities have
subsequently chosen to take monthly income from that annuity (i.e.
annuitize). In addition, 12% of pre-retirees and 15% of retirees have
rolled over assets from a 401(k), 403(b) or 457 plan to purchase an
immediate annuity.
The MetLife Retirement Income Decision Study: The
Silent Generation Speaks was conducted for the MetLife Mature Market
Institute by Mathew Greenwald & Associates, Inc., a company with
expertise in financial services research, during the first quarter of
2005 and consisted of a 14-minute online survey with a total of 1,012
respondents - 503 pre-retirees and 509 retirees. To qualify for the
study, participants had to be between the ages of 59 and 71, have
non-housing assets of a least $100,000 and identify themselves as a
primary or joint financial decision-maker for their household. The
margin of error (at the 95% confidence level) is +/- four and one-half
percentage points for both pre-retirees and retirees.
The MetLife Mature Market Institute is the
company's information and policy resource center on issues relating to
aging, retirement, long-term care and the mature market. The Institute,
staffed by gerontologists, provides research, training and education,
consultation and information to support Metropolitan Life Insurance
Company, its corporate customers and business partners.
MetLife, a subsidiary of MetLife, Inc. (NYSE: MET),
is a leading provider of insurance and other financial services to
individual and institutional customers. For more information about
MetLife, visit the company's Web site at
www.metlife.com.
Mathew Greenwald & Associates is a full-service
market research company with an expertise in financial services
research.
Click to More Senior News on the
Front Page
Copyright: SeniorJournal.com |
