A study by the Insured Retirement Institute (IRI) released today shows that many recent retirees are enjoying a financially secure retirement thanks to guaranteed monthly income from pensions and Social Security.
But future retirees will not be as fortunate unless they accumulate significant personal savings. Only about 17 percent of private sector workers continue to have access to a traditional pension plan.
IRIs report, Retirement, Income and Risk, found that more than eight of 10 current retirees report income of at least 75 percent of what they earned before retirement. The study is based on a survey of recent retirees (American workers retired for five to 15 years) with at least $100,000 in savings.
Further, only about 1 in 6 of retirees rely on Social Security for more than half of their retirement income, and two-thirds rely on an employer pension for at least 25 percent of their income. Most retirees with personal retirement savings are only tapping those accounts due to the legal requirement to take minimum annual distributions.
Our study shows that todays retirees are largely financially secure thanks to employer-provided pensions and Social Security benefits, allowing most of them to avoid accessing personal savings for monthly income, said Cathy Weatherford, IRI president and CEO. But over the next several years, well see an influx of retirees who are not covered by a defined benefit pension, have not sufficiently saved for an increasingly longer retirement and who will rely on Social Security as their only source of guaranteed lifetime income.
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An IRI study earlier this year showed that 42 percent of Baby Boomers have no retirement savings, while 38 percent have less than $100,000 saved for a retirement that may last 30 years or more. The average retirement age in the U.S. is 63.
Most workplace retirement plans today are based on defined contribution, such as 401(k) plans, in which employees contribute pre-tax dollars, sometimes including a matching contribution from an employer, as opposed to a pension with guaranteed lifetime income payments. Individuals may also choose to open Individual Retirement Accounts (IRA) to accumulate retirement savings.
To spur more retirement savings, IRI is advocating for federal legislation to make it easier for small businesses to offer workplace retirement programs through multi-employer plans. IRI also wants Congress to ease regulations that make it difficult for employers to offer guaranteed lifetime income options within retirement plans. Congress may act on retirement security legislation later this year.
Weatherford said Congress needs to act quickly to address the looming retirement crisis that Americans will face without sufficient retirement savings.
Social Security was meant to supplement retirement income, not be the sole source of it, Weatherford said. We must do more to encourage workers to save for retirement.
Weatherford added, Guaranteed income products provided by the private sector are the only solutions that can provide monthly income guaranteed for life. These products can be purchased with a portion of retirement savings to give retirees financial security while maintaining a portion of savings for unexpected expenses.
About the Insured Retirement Institute: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry and represents the entire supply chain of insured retirement strategies. Learn more at www.irionline.org.
Insured Retirement Institute
Dan Zielinski, 202-469-3026