Baby Boomers Face Growing Retirement Anxiety

Retirement anxiety is growing among baby boomers, many of whom have little to no retirement savings, forcing more Boomers to postpone retirement.

An annual survey of Baby Boomer retirement expectations by the Insured Retirement Institute (IRI) found that 45 percent of boomers have zero savings for their golden years.

Worse, many boomers are underestimating the amount of annual retirement income they may need and hold unrealistic expectations of the impact health and long-term care costs may have on their retirement budgets, and what costs are covered by Medicare.

Not Enough Income

IRI found that too many Baby Boomers have not saved sufficiently for retirement – if they have any savings at all. Of Baby Boomers with retirement savings, more than half have saved less than $250,000. The average annual Social Security income a retired couple can expect is about $28,000 per year, while the average couple age 65-74 today spends about $55,000. Only 30 percent of Boomers believe that they will need $55,000 annually or more in retirement income.

Underestimating Health Care Costs

Baby Boomers appear to have mismatched expectations for retirement given the low levels of potential income for many. Also, a significant number of Boomers exhibit uncertainty as to how much of their income that health care costs may absorb. More than 50 percent of Boomers believe health care costs will consume 20 percent of their income. However, HealthView Services estimates that a healthy 66-year-old couple will need 48 percent of their lifetime Social Security benefits to address health care expenses. Nearly half of Boomers believe that Medicare covers long-term care costs but that is not the case.

Longevity Risk: Will Income Last Throughout Retirement?

Eighty percent of Boomers surveyed said that it is very or somewhat important that retirement income sources be guaranteed for life. However, traditional workplace pensions are a disappearing commodity and too few Boomers are taking advantage of the one available product that can provide protected lifetime income – annuities. Two-thirds of Boomers who do not have an annuity cite insufficient savings or lack of knowledge as a reason for not owning one.

Retirement Anxiety

IRI’s survey shows an undercurrent of rising anxiety among Baby Boomers entering and preparing for retirement. Too little savings, underestimating health care costs and unrealistic expectations of how much retirement income they will need are all contributing factors. As Boomers age they have less time to save and fewer options to meet their retirement income needs, which may explain why more Boomers say they are delaying retirement and continue to work (and hopefully build savings).

Advisors and Annuities – Building Confidence

IRI’s survey showed that two factors contribute to greater retirement confidence. Boomers who work with a financial advisor and/or own an annuity are two to three times more likely to believe that they did an effective job planning for retirement and that their income will last throughout retirement.

Most telling, Boomers who work with an advisor and/or own an annuity are significantly more confident that their retirement savings will last at every age milestone from 75 to 90 years.

Conclusions

Baby Boomers are a learning laboratory for retirement planning. Younger Boomers do not have access to traditional pension plans that delivered lifetime income to workers, and younger generations are even less likely to enjoy the security of a pension. This is driving a need to expand financial education to encourage younger workers to save, plan and seek assistance to both accumulate retirement savings and to create monthly, lifetime income streams that ensure financial security.

Key factors that can help increase retirement confidence are:

• Save, Save, Save – Budget retirement savings monthly and take advantage of workplace plans, particularly if an employer matches employee contributions.
• Plan, Plan, Plan – Work with a financial advisor to establish a retirement savings plan that looks to create and maximize monthly income streams that will last throughout retirement. People who use an advisor have more confidence in achieving retirement security.
• Get Real About Expenses – Understand and plan for the likelihood, and potential impact, of medical and long-term care costs in addition to basic living expenses.
• Guarantee Income, Gain Confidence – Consider annuities to protect savings from market volatility and provide a paycheck for life, ensuring that income can’t be outlived and reducing the stress of transitioning from working years to golden years.

The Insured Retirement Institute (IRI) is the leading association for the entire supply chain of insured retirement strategies, including life insurers, asset managers, and distributors such as broker-dealers, banks and marketing organizations. IRI members account for more than 95 percent of annuity assets in the U.S., include the top 10 distributors of annuities ranked by assets under management, and are represented by financial professionals serving millions of Americans. IRI champions retirement security for all through leadership in advocacy, awareness, research, and the advancement of digital solutions within a collaborative industry community. Learn more at www.irionline.org.

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