Many people approaching retirement fear they don't have enough and want to turn to alternatives
Those approaching retirement in Canada and the US are among those facing an impending crisis in their senior years.
Following a recent report that Canadians are fearful about the impact of inflation on their ability to retire in the way they want to, a new study show that Americans are also facing a retirement income shortfall.
The annual Protected Retirement Income and Planning (PRIP) study from the Alliance for Lifetime Income reveals that more than half of those aged 45-75 say they don’t have enough saved for their retirement and one third are not even confident in covering basis living expenses.
To address these concerns, pre-retirees want to look at alternatives to the 60/40 portfolio and the 4% withdrawal rule, to see if they can shore up their finances.
More than 4 in 10 respondents said that they believe the market volatility seen in 2022 has had a long-term negative impact on their retirement outlook.
To offset challenges to their retirement budgets there has been a surge in interest in annuities with LIMRA’S 2022 Individual Annuity Sales Survey showing that there were $312 billion in total US annuity sales in 2022, a 23% increase from 2021 and 18% higher than the prior record of $265 billion in 2008.
Most (93%) of those who protected their portfolio in this way say they are satisfied with their investment choices.
Goodbye 60/40?
More than half of poll participants said they were not convinced that holding 60% stocks and 40% bonds was a viable portfolio allocation today while almost 3 in 10 said this approach is outdated.
“We’re about to hit Peak 65 next year, a historic demographic event when the largest number of Americans ever will reach 65, and far too many people still don’t have the savings and protected income they need to retire comfortably,” said Jean Statler, CEO of the Alliance for Lifetime Income. “The retirement savings crisis is about to become a retirement income crisis, so we have to continue to do everything we can to help people better prepare – especially those close to retirement.”
What advisors think
The PRIP study also asked for financial advisors’ views on the rapidly changing retirement planning landscape.
It found that:
- 8 out of 10 advisors changed their retirement planning approach in the last year.
- Though over half believe the 60/40 stock/bond model remains a viable approach, 43% say other asset classes should be added
- 52% say the topic of “retirement income” has increased in conversations with clients
- Close to half say the 4% rule is no longer valid because of changes, like inflation, market volatility, and longevity
- 4 out of 10 who changed their retirement planning approach in the past year put more into annuities.
Advisors also rate the importance of retirement income protection higher (81%) than asset growth protection (66%).
