Eighty-three percent of « Silent Generation » pre-retirees and 90% of retirees are confident that they have enough money to live comfortably until at least age 85, according to the MetLife Retirement Income Decisions Study: The Silent Generation Speaks.
This national poll, commissioned by the MetLife Mature Market Institute(R) and conducted by Mathew Greenwald & Associates, Inc., gauges the income and spending patterns in retirement of Americans between the ages of 59 and 71, often referred to as the « Silent » or the « Swing » Generation. MetLife released the findings of a study during a media webcast held today.
The study found that fixed sources of income are very important for the Silent Generation when deciding how much they can spend during retirement. In fact, the majority of those in the Silent Generation have, or anticipate, multiple sources of guaranteed income to carry them through retirement, including Social Security (79% retirees, 91% pre-retirees) and company pension plans (69% retirees, 71% pre-retirees), as well as annuities.
Nearly one-third (31%) of retirees surveyed say that they receive retirement income from annuities and half of pre-retirees (50%) expect income from annuities in their first year of retirement. Interestingly, retirees who had regular income from both a pension and an annuity were three times as likely as those with neither to say that retirement is much better than they expected it would be.
« The Silent Generation spent their working years during an era that was generally more stable for employees and they are, perhaps, the last generation that will, as a group, have a fairly strong sense of confidence about security in retirement, » said C. Robert Henrikson, president and chief operating officer of MetLife, Inc. « Many of them are able to rely on Social Security and pension plans as a stable source of income; however, most Baby Boomers won’t have that luxury. Future retirees will need to seek out new sources of guaranteed lifelong retirement income, such as annuities. »
Inheritance Not a Priority for the Silent Generation
Defying assumptions that the Silent Generation will carefully budget for and leave an inheritance to their children and/or grandchildren, most of the « Silents » view leaving an inheritance to someone other than their spouse as relatively unimportant.
Fewer than half of Silent Generation retirees (45%) and pre-retirees (43%) say that it is important to leave an inheritance to anyone other than their spouse.
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« With less replacement income from Social Security, a smaller likelihood of receiving a defined benefit pension plan and decreased chances of receiving an inheritance from their parents, how will the Baby Boomers and other cohorts, such as Generations X and Y, budget their money during retirement to ensure that it does not run out? » asks Sandra Timmermann, gerontologist and director of the MetLife Mature Market Institute.
« Hopefully, the Silent Generation pre-retirees and retirees whom we surveyed, whose savings patterns put them in the upper half in financial assets, will serve as role models for future generations. »
A Delicate Balancing Act
While the Silent Generation in this report has carefully saved for retirement, many pre-retirees and retirees are not as informed as they should about their longevity risk and have not taken steps to ensure that they will have enough money to last throughout their lifetime. One-third (34%) of pre-retirees have not calculated how much monthly income they will need in retirement. A larger percentage of pre-retirees (45%) and retirees (47%) have not estimated the annual rate of inflation over the next ten years.
One reason for the Silent Generation’s failure to address longevity risk may be their tendency to focus on short-term rather than long-term issues. While many of the pre-retirees and retirees surveyed worry at least once a month about a rise in the cost of medical care (50% pre-retirees, 40% retirees) and a drop in the stock market (44% pre-retirees, 39% retirees), fewer are concerned about longer-term problems such as the possibility of outliving their retirement savings (19% pre-retirees, 16% retirees) or needing to provide care to a family member who becomes chronically ill (24% pre-retirees, 22% retirees). In fact, one-third of retirees (37%) never worry about running out of money in retirement and another 35% worry about this less than once a year.
« As Americans live longer and healthier lives, the challenge for every generation is to make sure their money lasts as long as they do, » said Mathew Greenwald of Mathew Greenwald & Associates, Inc., which conducted the study on behalf of the MetLife Mature Market Institute. « This requires a delicate balancing act between income and spending – choosing the right portfolio, getting protection against retirement risks such as market risk, inflation risk and longevity risk, and choosing a level of spending that will allow assets to last. »
Among other key findings from the MetLife Retirement Income Decisions Study:
— Silent Generation Overestimates Income, Underestimates Expenses in Retirement
Nearly two-thirds (63%) of Silent Generation pre-retirees expect to spend less in retirement than they did during the years leading up to retirement, yet most retirees (51%) say they spend about the same and 19% spend more. On the income front, nearly half (48%) of the pre-retirees who anticipate receiving Social Security expect their Social Security payouts to equal 30% or more of their pre-retirement income, yet among retirees who receive it, only one-third (37%) currently receive payouts of this size.
According to the Social Security Administration, the average Social Security payment for 2005 is $955 month. In addition, of those who can estimate their investment returns, one-third of the « Silents » plan for a return on their investments of 9% or more, a figure that most financial professionals feel is highly unlikely.
— Annuity Purchasing Trends
Over half of Silent Generation pre-retirees (55%) and retirees (53%) have part of their assets in annuities. The vast majority of these annuities – about nine in 10 – are deferred, from which the individual did not initially receive monthly income. One quarter (26%) of the retirees who have deferred annuities have subsequently chosen to take monthly income from that annuity (i.e. annuitize). In addition, 12% of pre-retirees and 15% of retirees have rolled over assets from a 401(k), 403(b) or 457 plan to purchase an immediate annuity.
The MetLife Retirement Income Decision Study: The Silent Generation Speaks was conducted for the MetLife Mature Market Institute by Mathew Greenwald & Associates, Inc., a company with expertise in financial services research, during the first quarter of 2005 and consisted of a 14-minute online survey with a total of 1,012 respondents – 503 pre-retirees and 509 retirees.
To qualify for the study, participants had to be between the ages of 59 and 71, have non-housing assets of a least $100,000 and identify themselves as a primary or joint financial decision-maker for their household. The margin of error (at the 95% confidence level) is +/- four and one-half percentage points for both pre-retirees and retirees.
The MetLife Mature Market Institute is the company’s information and policy resource center on issues relating to aging, retirement, long-term care and the mature market. The Institute, staffed by gerontologists, provides research, training and education, consultation and information to support Metropolitan Life Insurance Company, its corporate customers and business partners. For a copy of the study or to view the webcast, visit MetLife2005incomewebcast.com.
MetLife, a subsidiary of MetLife, Inc. (NYSE: MET), is a leading provider of insurance and other financial services to individual and institutional customers. The MetLife companies serve individuals in approximately 13 million households in the
Mathew Greenwald & Associates is a full-service market research company with an expertise in financial services research. Founded in 1985, Greenwald & Associates has conducted public opinion and customer-oriented research for more than 100 organizations, including many of the nation’s largest companies and foremost associations.
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