Some retirees say they could have planned better for lifetime income—helpful insight for current participants.
Retirees are generally faring well in their post-working years, and that’s good news. Some of them have made out even better than they expected, according to AllianceBernstein’s (AB) Inside the Minds survey. Respondents also shared what they’d have done differently if they could plan their retirement again, with important takeaways for plan participants and sponsors.
Retiree Perspectives: Seeing the Future in Action Today
We queried retirees ages 54 to 75 to gauge their overall attitudes and the financial realities they face, and most of them relayed positive experiences so far. A combined 73% said their standard of living either improved substantially (3%) or somewhat (10%), or stayed about the same (60%), since they left work behind (Display).
The “stayed about the same” response is up from 47% in our prior survey, as fewer respondents indicated that their situation improved (down 9%) or declined (down 4%). Satisfaction levels stayed about the same and are broadly positive. Half confirmed that retirement is about what they expected, 25% said their situation became better, and 25% believe they’re worse off.
We also asked how retirees feel about their personal finances—here too, the vast majority said they’re doing fine or better since leaving the workplace. Most had money left over after paying bills and living expenses to enjoy frills like dining out and leisure activities.
Included in this broadly upbeat financial picture is a $50,000 annual income (including pensions) for most respondents, well below the average salary of $64,000, according to the Social Security Administration. This could mean the quality of retirement life depends on both financial status and emotional footing. That footing could depend on knowing whether income sources are guaranteed. To this point, 58% of respondents said they or their partners receive a guaranteed lifetime pension.
Pensions, unfortunately, are already becoming a rarity for younger generations. Only 15% of private-sector employees had access to a defined benefit plan in 2022, according to the Bureau of Labor Statistics, and their availability continues to shrink. Social Security plays a significant part in the income stream but replaces only about 30% for higher earners. This means that today’s participants from all walks of life will need to take up the slack by saving more in their working years.
Passing Down Words of Wisdom to Current Savers
Saving more was indeed the top retiree response (59%) to the question of what they’d do differently today (Display). Taking better care of their health also ranked high on the list, probably since both expected and unexpected healthcare costs can cut into retirement savings.
Participants tend to approach retirement strategies differently based on their acumen and confidence levels toward investing. But retirees’ insights offer something for everyone. Many participants are already attuned to the urgency, considering that an extraordinary 42% sock away more than 10% of their annual pay in contributions to their plan. But too many participants still go it alone, often making decisions that could work against them down the road.
Despite broad contentment, many retirees also had a dose of anxiety. For example, we asked those taking plan withdrawals if they were comfortable doing so. Two-thirds said yes, but only half of all respondents were happy to be spending some of those balances they worked so long to build. When it comes to seeing their savings drawn down, 60% had mixed feelings about it—or worse.
Retirement Income: How Much and for How Long?
The source of retirees’ mixed feelings could be concerns over whether they’ll have enough income to last their lifetimes. To that point, 87% cited inflation—at peak levels during our survey—among their top three financial concerns. Also registering high: having enough saved to live comfortably (56%) and knowing how much to withdraw annually without outliving their money (52%).
These three concerns tell us one important thing: the search for guaranteed lifetime income continues even into retirement. And it’s an option many wished they had had access to before they left the workforce.
In fact, our final survey question posed that very scenario. Asked whether they’d have used an option that turns savings into a guaranteed monthly retirement check if their employer offered one, 65% said yes, while 30% weren’t sure. Only 5% said no.
We believe that retirees’ experiences lend helpful insights into what current participants want—especially guaranteed lifetime income solutions. We also found that flexibility and control over their retirement assets are highly desirable—for both participants and retirees.
In fact, an impressive 69% of retirees over 65 said they haven’t touched their DC assets. Some may be reluctant to draw down their savings, while others may have alternate income sources that allow them to wait. But many certainly want to choose the size and timing of their income stream, a choice not all systematic withdrawals or annuity-style options provide.
We think demand for a guaranteed lifetime income, as well as flexibility and control over it, will only mushroom from here. In turn, the spectrum of solutions will expand, but they won’t all work the same way or address all needs. For plan sponsors, selecting the one that’s best for their participants is important. Asking a few key questions up front can help narrow the field.
To sum things up, we should all learn from our experiences—and those of others. Most retirees in our survey say they’re comfortable, but still worry whether they’ve saved enough to see them through. Plan sponsors should take heed, because current participants will cross the work finish line soon enough. And based on our broader survey, many of them aren’t that confident they’re ready for it.
“Target date” in a fund’s name refers to the approximate year when a plan participant expects to retire and begin withdrawing from his or her account. Target-date funds gradually adjust their asset allocation, lowering risk as a participant nears retirement. Investments in target-date funds are not guaranteed against loss of principal at any time, and account values can be more or less than the original amount invested—including at the time of the fund’s target date. Also, investing in target-date funds does not guarantee sufficient income in retirement.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
© AllianceBernstein
More Insurance & Annuities Topics >
