In today’s retirement age, Social Security and pensions are top sources of income for most retirees. However, as fears of dwindled pension funding and reduced Social Security intensify, those approaching retirement are sourcing alternative income options, says a new LIMRA Secure Retirement Institute (LIMRA SRI) report.
According to the report, 49% of pre-retirees and 32% of younger workers say their post-work life income will emerge from employer-sponsored retirement plans, individual retirement accounts (IRAs), and other savings vehicles. Four in 10 pre-retirees and over half (53%) of workers ages 40 to 54 believe their primary source of revenue will originate from their 401(k), IRA and additional savings.
Workers aren’t mistaken for allocating savings towards different routes, either. The anxiety behind impending Social Security and pension revenue lingers, especially as experts anticipate the potential funding shortfall to result in reduced benefits, cost-of-living cuts or a raise of the current retirement age, past 67.
And while employees plan to fund retirement income with savings vehicles, the study also finds workers are purchasing deferred annuities to supplement Social Security/pension income in hopes of receiving guaranteed income payments for life. Thirty-one percent of fixed-rate and fixed-indexed annuity owners are buying the investment to complement income from Social Security or their pension, while 24% of variable annuity buyers are doing so.
“Our research consistently shows consumers are worried about running out of money in retirement—67% of pre-retirees list having enough money throughout retirement as their top financial goal,” says Jafor Iqbal, assistant vice president, LIMRA SRI. “Annuities are fundamentally unique investment products, offering some combination of guarantees—guaranteed income that investors cannot outlive, protection of principal from market volatility, or guaranteed death benefits for beneficiaries. As more Americans face retirement without the benefit of a pension and growing longevity risk, an annuity can provide peace of mind.”
This new research is included in the fourth edition of LIMRA SRI’s Retirement Income Reference Book. More information on the study can be found here.