Less than half of retirees are using personal assets for retirement income, according to a study released Monday by Hearts & Wallets.
For a quarter of retirees, withdrawals from retirement accounts make up only about 17% of their income. Other sources include Social Security, pensions if they’re lucky enough to have them, dividends and interest, annuities, real estate and returning to work.
"Many Americans view their assets for use only in an emergency rather than as a ‘retirement income source,’ a beloved industry term that isn’t used in casual conversation by ordinary people,” Laura Varas, a partner with Hearts & Wallets, said in a statement.
Just one-third are between 65 and 74 years old, according to the survey, and 87% have less than $500,000 in assets. Those with more than $2 million are only 3% of retiree households, according to Varas.
“It’s not possible to understand retirees as a homogenous group. Some have pensions, others simply haven't saved enough to produce substantial income, and still others, of all wealth levels, are successfully funding their lifestyles with different types of savings or annuities,” Varas said.
Among pre-retirees, almost 60% said they planned to use personal assets for retirement income, including 80% of those more than five years away from retirement.
A LIMRA survey, released Tuesday, also asked pre-retirees about their plans for income after they stop working. LIMRA found that more than a quarter of workers between ages 55 and 64 say they aren’t sure how they’ll use savings in their defined contribution plans after they retire.
“It is surprising that such a large proportion of older workers have failed to do this basic level of income planning when most are within 10 years of retirement,” Matthew Drinkwater, associate managing director for LIMRA SRI Research, said in a statement. “Many believe that they can delay retirement indefinitely, or work in retirement, so it’s possible they feel that there’s no near-term need to engage in this kind of planning. But that belief is risky; people often retire earlier than anticipated.”
LIMRA found most workers expect to take withdrawals from their account, either directly or after rolling the assets into an IRA, while about 16% plan to convert their balance into some form of guaranteed income.