MainStay: Americans Counting on Speculative Assets for Retirement

November 17, 2005 ( - Many Americans are mistakenly counting on income from projected assets such as real estate appreciation and an inheritance for their retirement so they are getting a false sense of security, a new survey said.

In addition to over-estimating their available assets by factoring in home equity, pre-retirees expect to have greater savings – and a higher net worth – than current retirees did when they retired, according to the MainStay Investments 2005 Across Generations Retirement Income Survey. On average, today’s pre-retirees are predicting retirement savings of roughly $1 million and a net worth of $1,534,000. Given that their current savings and net worth average $660,800 and $904,000 respectively, “pre-retirees have quite a bit of ground to make up over the next few years,” the survey asserted.

“We’ve known for a long time that many investors – even those with a sizeable net worth – are seriously underfunding their retirement savings; now we’re beginning to get a better understanding as to why,” said Christopher Blunt, president of MainStay Investments, a division of New York Life Investment Management LLC, in a news release . “Today’s pre-retirees seem to be basing their nest egg calculations on ‘aspiration’ rather than ‘reality’. We are seeing a pattern of denial on the part of pre-retirees about how they actually expect to miraculously create this additional wealth in just a few years’ time.”

Though retirees and pre-retirees are aware that they may live longer, and recognize that they don’t want to run out of money, very few of them are actually financially planning for longer lives. Only one-third of pre-retirees “tried to match retirement savings and income to life expectancy,” according to the survey. Less than one in four people retired for 5+ years tried to match retirement savings and income to life expectancy.

According to the announcement, on average, 44% of respondents cited the value of their home as their most important financial safety net. In addition, just over a quarter (27%) of homeowners plan to fund their retirement by selling either their primary home or a vacation/investment property and 26% would do the same in an emergency.

Among active investors age 50 to 90, nearly six in 10 of current retirees and half of individuals who expect to retire within the next five years are developing their own short- and long-term financial plans rather than seeking the advice of a financial professional. When it comes to calculating the total dollars they will need to support themselves in retirement, a similar percentage of investors (44% of pre-retirees and half of current retirees) have figured out their income needs on their own, without the aid of a professional advisor.

Among the survey’s other findings:

  • Pre-retirees are voicing a strong need for advice on how to generate a steady stream of income in retirement. One-third of pre- and current retirees feel they need help understanding “ways to convert savings into guaranteed income.” Not surprisingly, then, nearly half (44%) of pre-retirees and 1-5 year retirees (46%) also say they need some or extensive help in understanding the features/benefits of income annuities.
  • Survey results show that pre-retirees and recent retirees are more interested in doing what they want without concern about leaving an inheritance, while older retirees are significantly more likely than their younger counterparts to want to pass money on to their heirs. Fully two-thirds of pre-retirees see retirement as a time to “do the things I want to do without concern about leaving an inheritance,” compared with 56% of one to five-year retirees and 47% of five-plus year retirees.

MainStay Investments 2005 Across Generations Retirement Income Survey was created to gather data specific to retirement income issues. The survey, conducted in May 2005, polled 1,209 middle and high net worth Americans of pre- and post-retirement age.