Retirees May be Using Inefficient Financial Strategies, Survey Shows

AARP, American Council of Life Insurers Examine Retirement Strategies of 60 to 75 Year Olds

Source: AARP Press Center | December 10, 2007

Washington, DC – A new survey shows that retirees, highly concerned about running out of financial assets, may be overly focused on preserving their savings principal and needlessly reducing their quality of life.

The survey, commissioned by AARP and the American Council of Life Insurers (ACLI), examined the retirement finance strategies of retirees age 60 to 75 with assets of at least $50,000, not including their homes.

The survey found that three in four of those interviewed (75 percent) are concentrating on either building or maintaining their “savings and investment principal.” This suggests that retirees may be sacrificing their present finances as a long-term management strategy. Only about one in four (23 percent) have allowed themselves to “dip into principal” in the last year, the AARP-ACLI study showed.

Plans to curtail spending may be a long-term strategy for many retirees given the fact that two in three (64 percent) of those interviewed said that they would cut back on their spending “if the value of [their] investments went down by five percent.”

“Many retirees may be able to improve the quality of their lives without risking their nest egg,” said Jean Setzfand, Director of Economic Issues Agenda at AARP. “While retirees should protect enough savings to allow for things like the skyrocketing costs of health care and a longer life expectancy, it is important to determine whether you can use your money to make retirement more enjoyable.”

“A guaranteed income product would substantially improve the peace of mind of many retirees,” said Walter Welsh, ACLI Executive Vice President, in referring to study findings that about half (49 percent) think such an investment would add to their peace of mind.

The report also identified five different management styles to describe how the retirees handled their finances, pointing to those two described as “thrifty” and “undisciplined” as the most interested in a guaranteed lifetime income strategy.

For more information on this report, please visit www.aarp.org or www.acli.com.