Tens of Millions of Americans Lack Protected Lifetime Income for Retirement; New Research Reveals Looming Retirement Income Crisis

  • Inaugural Protected Lifetime Income Index from Alliance for Lifetime Income highlights urgent need for Americans to secure reliable lifetime income for retirement.
  • Alliance kicks off Protect Your Retirement Income Day with virtual reality risk roadshow.
  • Launches Research Fellows, group of leading experts to raise awareness of protected lifetime income among consumers and financial advisors.

WASHINGTON, Oct. 04, 2018 (GLOBE NEWSWIRE) — Two-thirds of today’s pre-retirees haven’t taken the critical step of calculating their expected retirement expenses, while half of retirees admit they have not determined their expenses before they retired, according to new research from the Alliance for Lifetime Income. The Alliance is a nonprofit 501(c)(6) organization formed and supported by some of the nation’s leading financial services organizations to create awareness and educate Americans about the importance of protected lifetime income. This knowledge gap puts retirement at risk for tens of millions of Americans and highlights the need for consumers and their financial advisors to consider a new category of retirement planning: protected retirement income, lifetime income they can’t outlive.

Overall, only 38 percent of households have protected lifetime income in the form of an annuity or pension, leaving approximately 63 million households without protection, according to Alliance for Lifetime Income research.

These and other findings from the Alliance for Lifetime Income’s new Protected Lifetime Income Index illustrate the retirement crisis facing Americans who have focused primarily on accumulating retirement assets, without also considering the need for retirement income. The Index is a first-of-its-kind ongoing research initiative designed to track how effectively American households are planning for retirement income and shine a spotlight on the larger societal impact of the income-planning gap.

Moreover, Americans with protected lifetime income are far more confident their retirement savings and income will last the rest of their lives: 74 percent feel this way versus only 33 percent of those without an annuity or pension, according to the research. For many pre-retirees, protected lifetime income is critical for filling the financial gap between retirement needs and income from savings/investments and Social Security.

The launch of the Index coincides with Protect Your Retirement Income Day, the Alliance for Lifetime Income’s flagship event designed to drive nationwide awareness and education, as well as to amplify the national conversation around protected lifetime income and the role that annuities can play in today’s modern retirement plan.

“We’re facing the first generations of American workers approaching retirement with no clear idea of how much money they can count on receiving or what they can safely spend from their savings such as IRAs and 401(k) accounts, without running out of money,” said Dr. Michael Finke, Alliance for Lifetime Income Research Fellow and Dean and Chief Academic Officer of The American College of Financial Services. “Protect Your Retirement Income Day is a reminder that Americans should always consider how to acquire lifetime income for retirement that can give them the confidence to maintain the retirement lifestyle they want.”

Finke added: “Americans are living longer and face a variety of risks in retirement. Today, most retirees rely on withdrawals from their defined contribution savings to pay for expenses in retirement. If they had an annuity to accompany their savings and investments, they could always count on a source of guaranteed monthly income, which would reduce the risk of running out of money. And annuities are a solution that can provide that protected income for life.”

Finke is one of eight new Alliance for Lifetime Income Research Fellows. This group of independent experts and thought leaders from the academic and public policy worlds will serve as research partners to the Alliance on a variety of topics related to retirement security, longevity and protected lifetime income. The list of Fellows includes:

Jason J. Fichtner, Ph.D., is a senior lecturer and associate director of the Master of International Economics and Finance program at the Johns Hopkins School of Advanced International Studies.

Michael Finke, Ph.D., is Dean and Chief Academic Officer of The American College of Financial Services.

William G. Gale, Ph.D., is the Arjay and Frances Miller Chair in Federal Economic Policy and a senior fellow in the Economic Studies Program at the Brookings Institution.

Gopi Shah Goda, Ph.D., is a senior fellow and the deputy director at the Stanford Institute for Economic Policy Research at Stanford University. She is also a faculty research fellow at the National Bureau of Economic Research.

Seth D. Harris served as the Acting Secretary and Deputy Secretary of Labor under President Barack Obama. As Acting Secretary, he was a member of the Board of Trustees of the Social Security and Medicare trust funds. He currently is a Visiting Professor at the Cornell Institute for Public Affairs, and an attorney in Washington, DC.

Benjamin Harris, Ph.D., served as chief economist to Vice President Joe Biden and is currently the executive director of the Kellogg Public-Private Interface at Northwestern University’s Kellogg School of Management.

Wade Pfau, Ph.D., is a professor of retirement income in the Ph.D. program for Financial and Retirement Planning at The American College of Financial Services. He is also a principal at McLean Asset Management.

Colin Devine is the director of Advantage Insurance Inc., a San Juan-headquartered insurer, and senior advisor to Health Catalyst Capital

Many pre-retirees lack protected lifetime income

In addition to the retirement income knowledge gap, the Protected Lifetime Income Index also revealed several other important trends:

  • Overall, retirees are nearly twice as likely as non-retirees to have protected lifetime income — 58 percent of retirees versus 32 percent of those not retired.
  • The level of protected lifetime income (via a pension or an annuity) declines precipitously with age. More than half of Americans 55 and over have some form of protected lifetime income, compared with just one-quarter of 25- to 34-year-olds.
  • The two points above indicate that current retirees belong to the last generation benefiting from pensions, whereas 75 percent of younger Baby Boomers and later generations lack any source of protected lifetime income other than Social Security.
  • Retirees with protected lifetime income are less dependent on Social Security, which is estimated to replace only about 40 percent of pre-retirement earnings for the average worker.
    • Among retirees with at least $150,000 in assets, those with a source of protected income receive only about one-quarter of their retirement income from Social Security, while those without protected lifetime income need Social Security for about one-third of their income.
    • Among retirees with less than $150,000 in assets the difference is more stark: those with protected lifetime income receive an average of 40 percent of their income from Social Security, while for the larger non-protected segment, Social Security accounts for 80 percent of their income.

Protect Your Retirement Income Day kicks off this morning in Times Square, New York City where consumers, financial advisors and others will participate in various events, including a virtual reality experience that highlights the risks Americans face in their lives every day, and shows how they can retire that risk through protected lifetime income planning.

Consumers and financial advisors can find educational content and other resources about the new category of protected lifetime income at www.RetireYourRisk.org. For more information on the Alliance for Lifetime Income, visit www.AllianceForLifetimeIncome.org and follow the Alliance on TwitterLinkedIn and Facebook.

About the Alliance for Lifetime Income

The Alliance for Lifetime Income, based in Washington, D.C., is a nonprofit 501(c)(6) organization formed and supported by some of the nation’s leading financial services organizations and non-profit consumer and industry groups to create awareness and educate Americans about the importance of protected lifetime income. The Alliance is focused on helping to educate Americans on the risk of outliving their savings so they can enjoy their retirement lives. The Alliance provides consumers and financial advisors with the educational resources, tools and insights they can use to build plans for protected lifetime income in retirement. For more information about the Alliance, visit www.AllianceForLifetimeIncome.org.


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