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Retirement Planning > Retirement Investing

Today's Greater Need for Retirement Income

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The findings of a new report released today indicate that the decline in the stock market in the last six months of 2008 dramatically worsened the retirement outlook for middle-class Americans. The analysis, conducted by Ernst & Young LLP on behalf of the retirement coalition Americans for Secure Retirement (ASR), finds that due to the economic downturn, the retirement assets of recent and near retirees decreased between 14 and 17 percent in the last six months of 2008.

This decline significantly reduces the likelihood that middle-income retirees will have enough financial resources to last them through their lifetime.

The study also determined that many Americans will be forced to reduce their standard of living, some by as much as 51 percent, to avoid outliving their financial assets. In contrast, households with a guaranteed source of retirement income outside of Social Security, such as a lifetime annuity, showed the greatest chance of financial success.

Conversely, the study found that households with no guaranteed retirement income outside of Social Security are most vulnerable to outliving their financial assets.

From an advisor’s perspective, the study shows that clients need to cover at least a portion of their cash flow requirements with guaranteed income, says ASR Chairman Bill Waldie: “My recommendation would be to look at the client’s needs. Is there a portion of for-sure expenses that they need to have covered which might be suitable for some kind of guaranteed income for life, either for annuitization or some other kind of vehicle like that? That way they can use the other funds that they have to manage for discretionary income.”

The new 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.

“We found that there was a sharp deterioration in new retirees as well as near retirees’ vulnerability to outliving their financial assets,” says Tom Neubig, national director, quantitative economics and statistics at Ernst & Young LLP. “With the sharp decline in the equity markets, the retirement portfolios of people approaching retirement fell sharply, on the order of 14 percent to 17 percent. That translated into, for a married couple with $75,000 of income at retirement, age 65, the likelihood of them not outliving their financial assets fell by over 40 percent.”

The original retirement vulnerability study and the recently completed update are available online at


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