For Retirement Savers and Retirees, Outliving Assets Is Their Greatest Fear
June 8, 2023 — Boston
Americans seek certainty regarding their retirement savings amid longer life expectancies
The evolving national retirement landscape is more than an abstract concept for the everyday retirees and near-retirees worried about the reality of their own retirement. While today’s workers are aided by a proliferation of retirement income products and new legislation, retirement savers and retirees remain concerned about longevity risk, according to the latest Cerulli Edge—U.S. Retirement Edition, 2Q 2023 Issue.
According to the research, Social Security is the primary source of income for more than half (54%) of U.S. retirees. Of this share, 20% have no secondary source of retirement income. If action is not taken by legislators, the main Social Security trust fund would pay only 77% of its scheduled benefits by 2033.
At the same time, 58% of retirement savers (including retirees) cite outliving their assets as their greatest retirement fear. While the percentage is even higher for near-retiree and retiree generations (Generation X and Baby Boomers), longevity risk is the greatest concern across all generations. As a result, some individuals are working longer than anticipated—almost half (46%) of retirees who retired later than expected cite the need for income or savings to meet basic expenses as a reason for delaying retirement.
Legislation, including SECURE 2.0, was passed in part to address this gap. Provisions including auto-enrollment and auto escalation, as well as higher catch-up contribution limits for those ages 60-63, certainly will nudge the individual saver and near-retiree to address longevity risk early. However, plan participants are still in need of additional guidance as they prepare for retirement.
“Despite efforts toward workplace financial wellness, retirement savers are at a financial education deficit,” says Elizabeth Chiffer, associate analyst. “Solutions to address longevity risk in the defined contribution space include retirement income products that too often are sold as one-size-fits-all solutions rather than presented as an array of options that should be matched to the needs of an individual retiree. Uncertainty and confusion must be met with education, and ‘personalization’ must transform from jargon into action,” she concludes.
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