Americans live longer, but are not prepared for pension effects
Research by the American College showed that “the extension of a pension with just 5 years of 30 to 35 years increases the risk of exhausting savings with a striking 41%, based on historical market trends” research report. “And that risk only increases as the lifespan continues to extend, especially with healthy pensioners with a higher income.”
Moreover, Nationwide showed that many Americans seem to underestimate their chances of living up to the age of 100 and the associated financial requirements that such a lifespan can take. In a survey, only 29% of the respondents indicated that they would like to live for so long.
The other 71% mentioned factors that make such a prospect unattractive, including “worries about declining health and deep financial fears,” the report explained. “They will no longer have about three in four fear before they no longer have time.”
Economic volatility contributes to the challenges and worries. The joint study showed that 40% of non-retired Americans are planning to postpone their retirement as a result of economic instability. The situation is seriously exacerbated by an estimated decrease of 10% in projected portfolios arising from the US economic situation.
This requires more attention for pension planning, the organizations said in the report.
Michael Finke, co-author of the research and a professor in asset management at the American College of Financial Services, said it is clear that many people underestimate how long they will live and that planning should include more recording of potential lifespan.
“We see consistently that those who are planning to be self -confident about retirement,” said Finke. “The most important factors of that trust? Working with a consultant, having access to guaranteed income and building a plan that has been designed to last for a long time.”
There is also a “silver lining” in the data, the results. If Americans knew they would live longer, they would take more proactive steps to plan a longer life. These include adopting a healthier lifestyle (58%); Lightener attention paid to finances and at the same time increase the savings (67%); and accept fewer debts (63%).
In a recent discussion with Housing‘S Reverse MortGage Daily (RMD), Wade PFAU, a professor in pension income at the American College, suggested that some of the current economic volatility could increase the number of conversations about reverse mortgages as a resource for pension planning.
“It is always a matter of retiring, and suddenly the market had this withdrawal and you have to take a number of benefits to cover costs, be able to use something that is not exposed to that volatility, can really be useful to manage your investment performance in the long term,” PFAU said in April.
“So that was the original justification for the [Home Equity Conversion Mortgage (HECM)] Portfolio coordination strategy. And indeed, I think it is still so logical today as at any time, nothing has really changed in that respect. “
