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Hearts & Wallets study projects dip in retirement income market

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A research firm is projecting a decline in investable assets for retirement income due to the prolonged negative impact of low interest rates.

Research firm Hearts & Wallets, Hingham, Mass., disclosed this finding in Portrait of U.S. Household Wealth: Market Sizing, Segmentation and Product Ownership by Age, Assets, Life Stage and Behavioral Segment. The report leverages multiple government data sources and layers on new, proprietary quantitative 2012 data from more than 5,400 U.S. households, plus qualitative research to assess the state of American investor finances.

Hearts & Wallets projects a retirement income market in 2020 of between 14 to 24 percent of all U.S. household investable assets, lower than the 20 to 30 percent projections the research firm made at this time last year.

“Retirees are working longer and reducing income drawn from assets because of very low interest rates resulting from ongoing government policy and uncertain equity markets,” says Chris Brown, principal of Hearts & Wallets. “These factors impact the retirement income market.

“We’ve revised our 2020 projections downward as a result,” he adds. “The biggest concern is not the size of the market, but the unfortunate impact on millions of retiree households. Sadly, those getting hit worst are the middle and lower middle wealth groups.”

The projection is based on the behavior of retirees without pensions. In 2012, 45% of non-pensioner assets ]are being drawn for income at 4% or more, down from the 50% to 60% rate in 2006 and 2008. 

The study finds that wealthier households are more successful at taking moderate income. For households with $100,000 to $250,000, 35% of assets generate virtually nothing, and 20% are withdrawing an unsustainable 9% or more in income.

Only 21% of wealthier households generate almost no income, and very few take more than seven percent, the study notes.

Total U.S. household investable assets grew from $30.2 trillion at year-end 2010 to $31.9 trillion in 2012. Retirement assets over the same period are up slightly from $10.7 trillion to $10.9 trillion and taxable assets up to $21.0 trillion from $19.5 trillion.


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