Much of retirement planning focuses on financial, investment, and estate planning needs. Earlier research, such as the SOA’s Retirement Health & Happiness brief, showcases how this retirement planning overlooks some challenges of late-in-life retirees.
Retirees have access to more than 200,000 personal finance professionals, 10,000 senior centers, and approximately 28,000 assisted living facilities. Still, do retirees have all the information they need to make critical decisions throughout retirement, particularly in the latter stages of retirement?
In collaboration with Financial Finesse, the SOA Aging and Retirement Strategic Research Program prepared this guide as a resource to help older retirees and those who assist them. This guide will help the reader ask impactful questions to make informed decisions.
Author(s): SOA Aging and Retirement Strategic Research Program
If you claim Social Security at age 70 instead of 62 the sum total of your accrued benefits will be 17% higher if you make it to age 82 (which is the male life expectancy at 62). And remember that’s low risk, inflation-indexed income; there’s no better deal on the market.
Of course, delaying benefits means fewer years collecting them, but if you end up living to your early 80s you’ll come out ahead. The figure below plots how much you’ll get from Social Security (inflation-adjusted and discounted using today’s TIPS curve) at each age depending on when you retire.
And if you already claimed Social Security you can still change your mind and get higher benefits.
But if you are already retired (or resolved on it this year) and the market is down, it may seem like delaying Social Security isn’t an option. After all, you still need to eat.
This report examines older households’ sources of income, the amounts of this income, and how much each source of income contributes to total income. Older households receive income from a variety of sources, including social programs, private retirement savings, and earnings. Estimates from the 2018 Survey of Income and Program Participation (SIPP) show that in 2017, lower-income households relied on Social Security to a large degree, while higher-income households received a larger share of their income from private retirement savings and earnings.
First, we need to keep a distinction in mind between efforts to ensure the elderly do not suffer actual material deprivation, whether that’s lack of nutritious food or adequate housing or medical needs, for instance, and efforts to help Americans plan for retirement and alleviate their expressed worries about the unknowns of retirement.
Second, issues of well-being, such as social isolation, and larger questions of the “right” form of provision of long-term care assistance, are not simple issues of finances but are nonetheless important as Americans age, and these topics should not be drowned out by a “retirement crisis” narrative. It should also go without saying that we will urgently need to turn our attention to the Medicare system as well.
And, third, in one crucial respect our models may fail us: experts have worked out a set of recommendations for asset allocation and income spend-down in retirement, and a set of projections for building those models, which fall apart if our new low-interest world continues, Japan-like, rather than being a temporary situation that resolves itself as we recover from the pandemic. Whether this is a result of government policies or an inevitable consequence of the changing economy, this could upend both Biggs’ projections of retiree well-being and the path to retirement security envisioned by legislation like the SECURE Act 2.0.
Here’s some good news: using the costs of actual annuities available for consumers to purchase in June 2020, and comparing them to bond rates which were similar to the investment portfolios those insurance companies hold, the authors calculated “money’s worth ratios” that show that, for annuities purchased immediately at retirement, the value of the annuities was between 92% – 94% (give-or-take, depending on type) of its cost. That means that the value of the insurance protection is a comparatively modest 6 – 8% of the total investment.
But there’s a catch — or, rather, two of them.
In the first place, the authors calculate their ratios based on a standard mortality table for annuity purchasers — which makes sense if the goal is to judge the “fairness” of an annuity for the healthy retirees most likely to purchase one. But this doesn’t tell us whether an annuity is a smart purchase for someone who thinks of themselves as being in comparatively poorer health, or with a spottier family health history, and folks in these categories would benefit considerably from analysis that’s targeted at them, that evaluates, realistically, whether annuities are the right call and whether their prediction of their life expectancy is likely to be right or wrong.
If 40 million Americans were suffering from the same severe problem, you might think it would be the subject of considerable media attention, a host of government programs, infusions of business capital and a hot topic of national conversation.
The differences in reliance on income sources between those who are already retired and those who are not yet retired are likely attributable, at least in part, to apprehension about the Social Security system, as well as the rise of 401(k)s accompanied by a decline in work-sponsored pension plans.
57% of retired U.S. adults say they rely on Social Security as a major income source, and 38% of nonretirees expect it to be a major source for them.
Likewise, 36% of retirees and 19% of nonretirees say a work-sponsored pension plan is or will be a major income source.
Nonretirees are most likely to say a 401(k) or other retirement savings account will fund their retirement (49%). Meanwhile, 35% of retirees mention 401(k)s as a major funding source of their retirement.
Public servants often spend multiples of what their salaries will be in the jobs they seek in order to get those jobs since they have other incentives. One of those is likely the pension, even for part time employment, that comes with the job.
Though job-hopping makes it impossible to finger all the mayors or council people who game the system, here are some whose last employer was the Office of the Governor, Senate, or General Assembly who, based on data on retirees in the New Jersey Retirement System taken from the the state pension website are getting over $50,000 annually – along with some other familiar names.