Consumers are Retiring Earlier Than Planned and Underestimating Retirement Expenses, According to a Genworth Survey
Annuity Owners Report a Greater Sense of Certainty about Retirement Income
Richmond, VA (November 7, 2013)
/ PRNewswire / —
Consumers have unrealistic expectations about when they will retire, how much money they will need in retirement and where that income will come from, according to The Future of Retirement Income, a survey released today by Genworth.
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“Unpredictable retirement dates, compounded by misperceptions about retirement expenses and the uncertain futures of traditional sources of retirement income may leave many retirees at risk for outliving their retirement savings if they don’t prepare properly,” said Eric Taylor, Vice President and National Sales Manager for Annuities at Genworth. “The findings underscore the need for flexible financial solutions that provide reliable retirement income, such as fixed annuities.”
The survey findings highlight how:
Retirement Timing is Often Beyond Our Control
The Genworth study reveals that while nearly three-fourths (73 percent) of pre-retirees are confident they will retire as planned, only 48 percent of actual retirees retired when they expected. Among the more than 1,300 people surveyed, including more than 700 retirees, 46 percent retired sooner than planned.
Although the primary reason was due to job loss (36 percent), health issues (17 percent) and family issues (12 percent), an additional 25 percent said they retired early because they just “didn’t want to work anymore.”
Retirement Expenses Don’t Add Up
Expectations about retirement expenses also don’t match reality. More than half (52 percent) of pre-retirees expected expenses to decrease in retirement, when in fact 65 percent of actual retirees found expenses stayed the same or even increased in retirement.
The vast majority (77 percent) of retirees found that their general living expenses increased in retirement. More specifically, retirees experienced increases in healthcare costs (41 percent), real estate related expenses (26 percent) and money spent on dependents (18 percent).
A small minority (15 percent) found that their retirement plan exceeded expectations and 12 percent had more money saved than they anticipated.
Retirees Rely On Uncertain Income Sources
Retirees surveyed estimate 44 percent of their retirement income comes from pensions and an additional 28 percent comes from Social Security. Conversely, pre-retirees predict over half of their retirement income will derive from sources subject to market volatility and vulnerable to rising interest rates, including qualified retirement plans (27 percent), IRAs (13 percent) and stocks and bonds (12 percent).
Compounding the problem, only 50 percent of consumers who work with financial professionals have a written plan for retirement. And just two out of five have distribution plans for taking income in retirement.
Annuity Ownership Brings More Certainty
The survey also looked at consumers’ views about annuities in the context of retirement income and found that fixed annuity ownership brings more certainty and confidence. Fifty-six percent of annuity owners know how much money they will have each month in retirement, compared to 48 percent of non-owners. Additionally, annuity owners were significantly more confident than non-owners that their current retirement plans would afford them the retirement they desired.
The survey also showed that the majority of fixed annuity owners are satisfied with access, expenses and growth.
“For consumers looking to reduce uncertainty related to their financial futures, fixed annuities can be a great solution,” Taylor said. “Fixed annuities offer protection against market downturns, the opportunity to create guaranteed lifetime income, and can help offset other portfolio risks such as inflation and rising interest rates. As our survey finds, fixed annuities offer welcomed guarantees to consumers when it comes to retirement income planning.”
To learn more about how fixed annuities can protect retirement money and guarantee a lifetime income, visit Genworth’s recently launched annuities solutions website containing planning tools and educational videos, as well as more information about The Future of Retirement Income Study.
Genworth can also be found online through its social media platforms: Facebook and YouTube.
About the Study
During 2012, Genworth conducted the Retirement Income Planning study in conjunction with Directive Analytics, a third party research administrator. The study consisted of several phases, to include in-depth interviews, focus groups and quantitative surveys with both consumers and financial professionals. In October 2012, an online, quantitative survey was completed by 1,340 retired consumers and pre-retirees between the ages of 40 and 80 with at least $50,000 in household income. In December 2012, an online, quantitative survey was fielded among 400 financial professionals with at least one year of experience. Presented results represent statistically significant findings tested at 95% and 90% confidence intervals.
Annuity guarantees are based solely on the claims paying ability of the issuing insurance company.
Withdrawals/surrenders have the effect of reducing the contract value and death benefit. Withdrawals/surrenders of taxable amounts are subject to ordinary income tax and if taken prior to age 59 ½, an additional 10 percent federal penalty tax.
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a leading Fortune 500 insurance holding company dedicated to helping people secure their financial lives, families and futures. Genworth has leadership positions in offerings that assist consumers in protecting themselves, investing for the future and planning for retirement -- including life insurance, long term care insurance, and financial protection coverages -- and mortgage insurance that helps consumers achieve home ownership while assisting lenders in managing their risk and capital.
Genworth operates through three divisions: U.S. Life Insurance, which includes life insurance, long term care insurance and fixed annuities; Global Mortgage Insurance, containing U.S. Mortgage Insurance and International Mortgage Insurance segments; and the Corporate and Other division, which includes the International Protection and Runoff segments. Products and services are offered through financial intermediaries, advisors, independent distributors and sales specialists. Genworth, headquartered in Richmond, Virginia, traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com. From time to time, Genworth releases important information via postings on its corporate website. Accordingly, investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information is found under the "Investors" section of genworth.com