Many Americans Clueless on How to Spend Retirement Savings

On average, respondents who planned to retire thought they would need $3,200 per month to live on after they stopped working, and a fifth thought they would need $5,000 or more.

“Based on the average household income of $52,000, this number may seem practical at first glance,” Rich Rausser, Pentegra’s senior vice president of client services, said in a statement.

“But many people do not factor in having to pay for health coverage and cost-of-living increases when estimating how much they will realistically need.”

The survey also uncovered a lack of understanding and awareness of options available to access retirement savings, with less than a third of respondents very familiar with each of the following options:

• Lump-sum payouts, 24%
• Routine quarterly or monthly payments, 29%
• Annuities for themselves (guaranteed monthly payment over their lifetime), 23%
• Annuity for themselves for life and the life of their beneficiaries, 17%, with one in four employed adults not even aware that this option existed

“More people need to know about these annuities,” Rausser said. “They take the stress and guesswork out of distribution, stretching your savings as far as possible.”

He said Pentegra called annuities “pension-izing”: meaning they replicate some of the most important features of pension plans. “These were features that made a traditional retirement simple when pensions were more commonplace,” he said.

— Check out The Obvious Retirement Risk That’s Not in the Models on ThinkAdvisor.