An overwhelming majority of U.S. households with $2 million or more in investable assets are confident they won’t run out of savings if they live to 90 years old, says LIMRA. The problem is, most households don’t have that level of savings.
LIMRA recently surveyed Americans ages 40 to 85 with at least $100,000 in household investable assets to explore their perceptions about retirement income and their confidence in their retirement security.
LIMRA found between 80% and 90% of households with $2 million plus strongly agree (51%) or somewhat agree (32%) they are confident they won’t run out of money by age 90, said Matt Drinkwater, LIMRA’s corporate vice president of Annuity and Retirement Income Research.
But that kind of confidence begins to drop off significantly for investors who have between $1 million and $2 million saved. In that group, only 28% strongly agreed and 42% somewhat agreed. Not surprisingly, confidence sinks further for those with only $100,000 to $249,000 in investable assets — only 12% strongly agreed and 29% somewhat agreed that their “savings and investments won’t run out if I live to be 90 years old.”
Relatively few households with enough assets
Among the 47 million households headed by someone age 60 or older, 7% had household investable assets of at least $2 million, Drinkwater said. Only 6% of the 89 million households in the U.S. headed by someone 40 to 85 years old has that amount, Drinkwater said.
He added that percentage drops to 4% when all 128 million U.S. households are included. Investable assets primarily include investment accounts, IRAs and defined contribution plans. The figures are based on LIMRA’s 2019 Survey of Consumer Finances, adjusted to 2022 asset levels.
Income expectations dropping
Among retirees who responded to the recent survey, 70% say that their households receive enough income from various sources to cover the household’s basic living expenses. But for future retirees, only 44% expect to receive enough income from Social Security, traditional defined-benefit pension plans, and/or lifetime-guaranteed annuities to cover their household’s basic living expenses.
Regardless of their household income sources, workers overwhelmingly agree that lifetime-guaranteed income can provide peace of mind. LIMRA research shows this sentiment is on the rise. Among both retired and non-retired Americans surveyed, a larger proportion (86%) in 2022 said having lifetime-guaranteed income gives them peace of mind in retirement, compared with 76% in 2018.
Rising interest in annuities
LIMRA research shows interest in annuities had been level or down for much of the last decade, reaching a low of 33% in 2018. But in 2022, for the first time, a majority of workers (51%) said they would consider converting a portion of assets into a lifetime-guaranteed annuity in retirement. In 2022, annuity sales hit records and commission-free products grow in popularity.
“The ongoing decline in pensions could partly explain why workers feel they will not have enough income, but other factors like uncertainty about Social Security benefits, market volatility, and the rising cost of living, are undoubtedly playing a role,” Drinkwater said. “There has been significant disruption in the economy and the finances of many Americans over the past several years, so it is to be expected that workers nearing retirement will increasingly feel uncertain about their ability to make ends meet throughout their retirements. In a time of extreme instability, the perceived value of investments offering stability, and the peace of mind that comes with it, can’t be underestimated.”
LIMRA research indicates that 49% of immediate annuity buyers in 2020 were age 71 or older; only 5% were under age 55, Drinkwater said. But deferred income annuity buyers skew younger, with 23% under age 55, and only 6% age 71 or older, Drinkwater said.
Sure thing! Let me put on my expert hat for a moment. As someone deeply immersed in the world of financial planning and retirement security, I've delved into numerous studies and surveys, including those conducted by organizations like LIMRA. Now, when we look at the article you shared, it's evident that LIMRA, a reputable source in the field, has conducted a survey targeting Americans aged 40 to 85 with a minimum of $100,000 in household investable assets.
Let's break down the key concepts covered in the article:
-
Confidence in Retirement Savings:
- LIMRA's survey reveals that an overwhelming majority of U.S. households with $2 million or more in investable assets are confident they won't run out of savings by the age of 90.
- The confidence level drops significantly for those with $1 million to $2 million saved and even further for those with $100,000 to $249,000 in investable assets.
-
Distribution of Wealth:
- Only a small percentage of households, particularly 7% of those headed by individuals aged 60 or older, possess investable assets of at least $2 million.
- The overall percentage decreases to 6% for households headed by individuals aged 40 to 85, and further drops to 4% when considering all U.S. households.
-
Income Expectations:
- Among retirees, 70% state that their households receive enough income to cover basic living expenses.
- However, for future retirees, only 44% expect sufficient income from sources like Social Security, traditional pensions, and lifetime-guaranteed annuities.
-
Interest in Annuities:
- Annuity interest had been declining but saw a turnaround in 2022. A majority of workers (51%) expressed a willingness to consider converting assets into lifetime-guaranteed annuities.
- The decline in pensions, uncertainty about Social Security benefits, market volatility, and the rising cost of living contribute to workers' feelings of financial insecurity.
-
Rising Interest in Guaranteed Income:
- The article notes a rising interest in guaranteed income for retirees. A significant proportion (86%) in 2022, compared to 76% in 2018, believe that lifetime-guaranteed income provides peace of mind in retirement.
This wealth of data paints a comprehensive picture of the financial landscape for retirees and soon-to-be retirees in the U.S. It highlights the challenges, perceptions, and shifts in attitudes towards financial instruments like annuities. The evolving economic landscape and various uncertainties contribute to the changing dynamics of retirement planning.
