Six in Ten Retirees Are Trying to Hold On To Their Life Savings
February 2004 (Newstream) -- After spending their working lives building up a comfortable nest egg, ironically the last thing on the minds of many retirees is to how to spend it. Among a nationwide sample of Americans who retired in the last few years, surveyed by Prudential Financial, Inc. (NYSE:PRU), 6 in 10 are trying to live on their Social Security and pension benefits while keeping their retirement savings intact. This is just one of several "hoarding" tendencies among retirees identified in Prudential's study.
"Today's financially savvy retirees get their peace of mind from knowing they have control over their savings," said David Odenath, president of Prudential Annuities. "Retirees owe it to themselves to explore the investment options available to them and to manage their savings to most effectively accomplish their goals."
The study among recent retirees is part of a multi-pronged outreach by Prudential Annuities to raise awareness among retirees and soon-to-be retirees about the importance of financial planning before and during retirement. Coined Living In Retirement, the program targets both consumers and the investment professionals on whom they rely for advice and product solutions. Through professional training and client seminars Prudential will explore topics that include pre- and post-retirement planning, the tax consequences of retirement, and the value annuities provide in a comprehensive retirement portfolio.
"Simply holding onto a lifetime of savings could have negative tax consequences for someone in retirement," continued Odenath. "By taking advantage of financial solutions designed to make the most of their money, retirees can create a lifetime income stream to support a comfortable retirement."
Notable findings from the Prudential study of recent retirees include:
Retirees view their entire nest egg as a safety net and often derive their retirement income solely from what arrives in their mailbox - Social Security and pension checks.
6 in 10 retirees admit they are trying not to touch their savings at all and live on the monthly income from Social Security and pension. (See Figure 1)
Few retirees focus on generating income from their savings.
Instead, retirees' primary focus is to preserve, or even continue to grow their assets. A paltry 18 percent said their focus is to "generate income from savings." This holds true even for retirees who have accumulated significant savings. (See Figure 2)
In fact, most retirees hope to keep a majority of their savings or spend down as little as they can during the course of their retirement.
About 4 in 10 stated outright that, as they live in retirement, they still hope to keep most of their savings. The second biggest group, or 1 in 3 retirees, plans to spend down "only some of their savings." Of the 24 percent who plan to spend down most of their savings eventually, more (14 percent) intend to use their savings to cover expenses later in life than for regular monthly living expenses (10 percent). (See Figure 3)
Hoarding tendencies are largely based on emotions, particularly the fear of outliving savings and becoming a burden.
Among those who plan to keep most of their savings, 43 percent will do so out of a desire to not outlive their money and become a burden to someone else. (See Figure 4)
Retirees appreciate the flexibility offered by annuities.
Among those who currently use a portion of their savings to generate income, 65 percent agree that annuities' feature of providing a death benefit at least equal to the amount invested is "attractive," and 70 percent were attracted to annuities' guaranteed income payments for a fixed period or for life. Interestingly, retirees who are not generating income through their savings are just as likely to favor these attributes of an annuity. They may simply lack the understanding of how to make annuities work for them. (See Figure 5)
"Today's retirees have worked hard all their lives and they shouldn't have to make sacrifices in retirement," said Odenath. "By using the flexibility of an annuity, retirees can meet multiple financial and emotional needs, as well as enjoying the standard of living they deserve and avoiding becoming a financial burden on loved ones."
For more information on Living In Retirement, and to learn the Top Ten Mistakes To Avoid In Retirement, visit www.prudential.com/retirement_mistakes.
Prudential's Study of Recent Retirees is based on a nationwide telephone survey of 400 Americans who retired within the last 8 years and have a minimum of $100,000 in retirement savings. The margin of error is plus or minus 5 percentage points at the 95% confidence level.
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