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What Now? How Retirees Manage Money To Make It Last Through Retirement

While the accumulation phase of retirement planning receives much attention, the spending phase often gets less consideration. This joint study by AARP and the American Council of Life Insurers (ACLI) examines retirees' attitudes about guaranteed income in retirement and their money management practices. It finds that about half (49%) are very or somewhat concerned about using up most of their savings and investments. Keeping enough money for later in life and obtaining a dependable income from savings and investments are important to the majority of retirees surveyed, with keeping enough for later in life mentioned by the largest share.

The study identifies five different asset management styles among respondents: Investor, Manager, Thrifty, Undisciplined and Troubled. The Thrifty group has the most interest in seeking a guaranteed lifetime income solution, followed by the Undisciplined, then Troubled and Manager, and Investor.

Key findings include the following:

  • Nearly all respondents (91%) say keeping enough money for their needs later in life is very or somewhat important when making decisions about withdrawing money.
  • About four in ten respondents would be very or somewhat likely to trade liquidity for income that was guaranteed to last for the rest of their life if they
    • were given certainty that they would not lose any money (42%)
    • were protected against a large drop in the stock market (40%)
    • were given certainty about the rate of return (38%)
  • About six in ten respondents feel that convincing reasons for purchasing a guaranteed income product are: independence for life (61%), peace of mind (61%), higher annual income (58%), and budget management (57%).
  • While retirees tend to be highly loss averse, surprisingly those who are more loss averse are less willing to trade liquidity for other benefits found in guaranteed lifetime income solutions.

Mathew Greenwald & Associates conducted this telephone survey for AARP and ACLI between July 18 and August 19, 2007, interviewing 800 retirees (200 with employer-provided pensions and 600 without), all aged 60 to 75 with financial assets of at least $50,000. For more information, contact Colette Thayer at 202-434-6294. (137 pages)

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