Study Finds We May All Need a Little Retirement Help

csquires Blogger



Sometimes the good old days really do look good.


Exhibit A: pensions.


If you don’t have a pension, there’s a support group for people like you. It’s called “most people.” In 1979, 87% of workers in the private sector had access to a pension. By 2015, that number was down to 15%, according to the Bureau of Labor Statistics.


The decline of pensions sparked a team of researchers working with the Stanford Center on Longevity to re-examine today’s retirement planning and found in today’s “defined contribution” environment (think 401(k)s and IRAs), many workers may need help planning because few will get a monthly pension check, and many may live a lot longer in retirement than they expect.


The study led to a detailed report, Optimizing Retirement Income Solutions in Defined Contribution Retirement Plans, developed by researchers looking for a better way to help people get ready for retirement.


Researchers sought the best ways for retirees to use their savings to generate retirement income and still prepare for emergency expenses, big one-time expenses, and just buying the little things that make them happy.


Turns out, there may be no single answer, and going it alone may not quite be the right way to prepare.


“Deciding how to deploy savings to generate retirement income, and estimating the amount of savings that is needed to generate target amounts of retirement income, is a task that is beyond the interest or skill of many retirees,” the study found.


Left to their own, retirees may spend savings too quickly or do the opposite, conserve too much, the report found. “Neither strategy seems optimal,” researchers said.


Planning may come down to what each individual wants, the study found: Increase retirement income, or leave an inheritance? Give up control of savings in exchange for guarantees, or hang on to a lump sum that can be spent at a variable rate?


The report also discusses Social Security and using savings to delay claiming benefits, as well as a mention of reverse mortgages, and insurance or investments outside of tax-qualified plans.


Among its conclusions, the study suggests financial professionals may need to dive in and help their clients diversify savings, understand Social Security, investments, and annuities.


“Advisors can add value to their clients by using concepts in this report to develop retirement income portfolios that deliver retirement income throughout their clients’ lives, no matter how long they live,” the study reported.


The full report is online and available for download.


For a better understanding of Social Security and its role in retirement, check out Transamerica’s Field Guide to Social Security, an overview of benefits, claiming strategies, and survivor’s benefits.


Know someone who has a simple retirement-spending plan? Share your ideas. Let us know what you think.




Your standard of living in retirement depends on your willingness to take prudent risks during your working years. Recognize that living off assets paying 1% a year would require extraordinary savings rates to maintain consumption after retirement at pre-retirement levels, If you expect to live a long time, you need to save a long time and generate financial returns adequate to support your retirement years. Living off Social Security alone is a bad option.


Saving for retirement requires diligence, persistence, and a willingness to take prudent risks. Compare historical returns on different investments, but remember that the future will be different than the past. Don't bet everything on a single stock, even your employer's stock. Diversify your investments to reduce risk.