New Lows- Baby Boomer Retirement Confidence Study

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As our economy continues to sputter along, from the front lines of retirement planning I continually feel like we are in a tenuous economic environment. The effects of a prolonged post-recession period of what feels like tepid growth are showing up as new people call into Annuity Straight Talk concerned about their retirement income and finances.

It seems that while no one is getting wiped out as so many did in 2008-9, it also seems that no one is really thriving right now.

And my front-line barometer seems to be in keeping with studies and more formal research.

The Insured Retirement Institute (IRI) today released a new research report that found Baby Boomers’ confidence in having sufficient savings to last throughout retirement has dropped to a five-year low. Declining each year since 2011, the first year this study was conducted, the report found only 27 percent of Boomers are highly confident their savings will last. Despite the drop in confidence, 44 percent of Boomers expect their financial situation to improve during the next five years, up from 32 percent in 2012.

The prolonged low-rate environment means it takes significantly more assets to maintain a lifestyle. A good rule of thumb used to be that you needed about 18x your annual income needs in retirement savings to be comfortable. Now, we look at 25x as a more sustainable multiple.

Now, your mileage will vary and this is only a rule of thumb, but when you combine low rates and rising longevity, the picture is pretty clear. It takes more money just to hold your position than it used to.

Here are some other facts:

  • 19% of Boomers are extremely or very confident they will have enough money to pay for higher education costs for their children, down from 34% in 2014 but about the same as in 2012, when this question was first asked.
  • 28% of Boomers are extremely or very confident they will have enough money to pay their medical expenses in retirement, down from 37% in 2011.
  • More than one-third of working Boomers (36%) plan to retire at age 70 or later, significantly higher than the one in five (19%) that planned to retire at or after age 70 in 2011.
  • Less than half of Boomers believe it is somewhat or very important to leave an inheritance for their loved ones, down from 62% in 2011.
  • One in five Boomers (18%) are uncertain when they might retire, and three-quarters of them cite not having saved enough or being unsure they will have enough to retire on as the reason for their uncertainty, compared to almost four in 10 (39%) that were unsure of their retirement age in 2011.
  • One in five Boomers are extremely or very confident they will have enough money to pay for long-term care in retirement, down from about one-quarter in prior study years.

The silver lining:

One interesting finding in the study is the significant difference in outlook the survey revealed for those who are working with financial advisors. Boomers who work with advisors are more satisfied, and the gap is widening:

  • Among Boomers who work with advisors, however, only one in 20 are unsure of their retirement age.
  • In 2015, seven in 10 Boomers (68%) who work with an advisor are extremely or very satisfied with the way things are going in their lives, versus only four in 10 (42%) of those who do not work with an advisor.
  • In 2014, about four in 10 Boomers working with an advisor were satisfied, as were six in 10 not working with an advisor.

And here is the most revealing of the findings:

Annuity ownership is highly correlated with retirement planning, retirement readiness, and positive retirement expectations.

  • Over nine in 10 Boomers who own annuities have money saved for retirement; less than half of Boomers who do not own annuities have retirement savings.
  • Eight in 10 Boomers who own annuities expect their money to last throughout retirement, and to have at least some disposable income for travel and leisure, compared to less than half of those who do not own annuities.
  • More than six in 10 Boomers have calculated the amount they think they will need to have saved to retire, versus less than one-third of non-annuity owners.
  • More than six in 10 annuity owner Boomers have consulted a financial advisor to help them prepare for retirement; fewer than two in 10 non-annuity owners have taken this step.

The lesson:

Be in that top tier of people proactively preparing for retirement. Be an annuity owner and be prepared!

We’re ready for you when you are ready to take that next step.

All the best,

Nathaniel M. Pulsifer and Bryan J Anderson

Further readings

Fixed Indexed Annuity Guide

Fixed Indexed Annuity Withdrawals

How Much Do Fixed Annuities Pay?

Last Updated on March 4, 2024 by Bryan Anderson