1. According to the Social Security Administration, what percent of American’s retirement income comes from social security?
According to the Social Security Administration, 33 percent of American’s retirement income comes from social security. The percent of an individual’s retirement coming from social security is a big variable, with 50 percent of married retirees and 70 percent of unmarried retirees receiving over half of their income from social security. Additionally, 21 percent of married retirees and 45 percent of unmarried retirees rely on social security for over 90 percent of their income.
2. Humans continue to live longer and longer lives. How does this affect planning for retirement?
Human life expectancies have been continuing to increase by about two years each decade. Research conducted by the World Health Organization in conjunction with Imperial College indicates that there is no slowing in this trend. People planning for retirement should expect this trend to continue over their lifetimes and plan on average life expectancy increasing by about two years each decade.
3. What portfolio changes might be appropriate to address increasing retirement longevity?
To address increasing longevity retirees should consider portfolio changes that increase assets or income later in their retirement years. This can be accomplished by increasing allocation to growth investments, increasing allocation to guaranteed incomes such as annuities, or a combination of the two. Switching investments away from growth investments into bonds does not help to address increasing longevity. Retirees often fail to adequately address their needs for later retirement, but should still be conservative with funds for short-term needs when making changes.
4. Inflation of living expenses causes problems for retirees living on fixed incomes. If you retired at age 62, approximately how much more income would you need at age 90 if all your expenses inflated at 4 percent per year?
With steady inflation of four percent, costs will nearly triple in a 28-year period. This means that someone retiring at age 62 could need three times as much income at 90 to pay the same bills. Looking at it another way, a retiree’s same income at age 90 would purchase one-third of what it did at age 62.
5. Which of the following investments provides a source of income you cannot outlive?
The only income sources you can’t outlive are pensions and annuities, and a pension is just a form of an annuity. Of the choices listed for the question the only one which provides a source of income you can’t outlive is an annuity. Other investments can be used to purchase annuities, but don’t provide guaranteed lifetime income themselves.
6. What percentage of Americans largest retirement fear is running out of money?
According to the latest Aegon Retirement Readiness Survey the largest retirement fear of Americans is running out of money in retirement, a fear selected by 52 percent of respondents. The second-largest fear of Americans in retirement is declining physical health, selected by 44 percent of the survey respondents.