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Retirement Planning > Retirement Investing

Video: Middle-class have greater retirement risk than previously thought

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A new report from retirement coalition Americans for Secure Retirement finds the events in just the last six months of 2008 have dramatically worsened the retirement outlook for the middle class, specifically.

The analysis, conducted by Ernst & Young, found the retirement assets of recent- and near-retirees decreased between 14 percent and 17 percent.

The report is an update to Ernst & Young’s July 2008 Retirement Vulnerability Study. The 2008 study found that almost three out of five middle-class new retirees could expect to outlive their financial assets if they attempted to maintain their pre-retirement standard of living.

“In only 6 months, the financial downturn has had a significant adverse impact on the retirement assets of middle-income Americans and on their prospects of a secure retirement. As was the case in our 2008 study, our update finds that people with a guaranteed source of income outside of Social Security are much better positioned than those that are without guaranteed income,” said Tom Neubig of Ernst and Young in a released statement.

“Now more than ever, it is critical that Americans have guaranteed retirement income through vehicles like lifetime annuities,” said Bill Waldie, chairman of ASR. “The traditional retirement system of pensions and Social Security are increasingly no longer enough for retirees and there is a critical need for Congress and policy makers to act, to help Americans secure their retirement future.”

Findings of the report include:

  • A recently retired married couple earning $75,000 a year with a defined benefit plan has a 57 percent chance that they will have enough financial resources in retirement. The same couple, without any guaranteed source of retirement income, is left with only a 6 percent chance of financial success.
  • A near retiree single female, earning $50,000 a year with a defined benefit plan, has a 66 percent chance that she will not outlive her financial resources. The same female, without any guaranteed source of income in retirement, is left with only an 18 percent chance of financial success.

The matter of this crisis recently peaked interest from Congress members. House Rep. Earl Pomeroy, D-N.D., and Ginny Brown-Waite, R-Fla., have introduced the Retirement Security Needs Lifetime Pay Act, H.R. 2748. While in the Senate, Sens. Kent Conrad, D-N.D., and Pat Roberts, R-Kan., are planning to re-introduce the Retirement Security for Life Act, a measure that received broad bipartisan support in the 110th Congress. Both bills would create greater accessibility to non-qualified lifetime annuities by creating a tax incentive to convert a portion of a person’s savings or assets into a steady “paycheck” for life.

In the updated report, Ernst & Young looked at six of the original 36 typical middle-income households approaching retirement from the 2008 study, chosen because they represent retirement vulnerability across all middle-income households approaching retirement: married couples at or near retirement making $75,000 in earnings with and without guaranteed retirement income, and single females making $50,000 in earnings seven years before retirement with and without guaranteed retirement income.


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