A new study by the Insured Retirement Institute (IRI), released today at the its annual meeting being held in Colorado Springs, found that 80 percent of retirees are receiving some income from a pension plan, and 42 percent are receiving at least half of their retirement income from a pension.
But while pensions are serving a large percentage of current retirees, future retirees are unlikely to be able to rely on a pension. As many as 56 million baby boomers, who are reaching retirement at a rate of 10,000 per day, will not receive retirement income from a pension. Further, only 24 percent of current private-sector workers are covered by a defined benefit plan, and future retirees may need to save more than $400,000 to make up for the income shortfall created by the decline of pensions.
Pensions and annuities provide a measure of financial security for retirees. The IRI study found the majority of retirees who had at least $50,000 in savings at retirement have retirement income above the national median and report relatively few concerns about their finances. However, a significant portion of these retirees are receiving lifetime income from traditional pension plans and annuities, said the report.
“Replacing pensions and achieving the financial security these plans provide to retirees will be a key issue for future generations,” said Cathy Weatherford, president and CEO of IRI in a press release. “As baby boomers retire in greater numbers over the next decade, and as Gen Xers begin to leave the workforce, financial professionals have an historic opportunity to help Americans create their own pensions, through Social Security optimization and the use of lifetime income strategies, to help their clients attain the same security, lifestyles, confidence and positive outlooks as the participants in this study.”
The study surveyed 806 Americans between the ages of 65 and 80 who retired with at least $50,000 in investable assets and have been retired for at least five years.
Other key findings of the report include:
- Nearly 60 percent of retirees have worked with a financial professional and 93 percent say the advice and guidance they have received as been effective.
- Seventy-two percent of retirees receiving income from an annuity were satisfied with their investment. This was higher than any other type of investment or retirement savings vehicle.
- Four in 10 retirees have experienced a major health event, such as a heart attack or stroke, and 25 percent have experienced a significant nonmedical event, such as a major home repair.
- Twenty-seven percent of retirees surveyed have relocated their primary residence in retirement. Six in 10 have relocated for lifestyle reasons, while three in 10 relocated for lower cost of living.
- Most retirees, 67 percent, believe they have less than a 25 percent chance of requiring long-term care services in retirement. Yet estimates from the Department of Health and Human Services predict 70 percent of those turning 65 today will need such services. Six in 10 retirees incorrectly believe Medicare will pay for long-term care services.
The study was conducted by Greenwald & Associates.