A new report from World Economic Forum shows that retirees could outlive their savings by a decade or more due to higher life expectancy. “Women should prepare to bear the brunt of such shortfalls, going without retirement savings for at least two years longer than their male counterparts.” (3)
“The size of the gap is such that it requires action,’ says report co-author Han Yik. (1)
The report shows men in the US have a retirement savings gap of 8.3 years. The report shows that women in the US have an average 10.9 year gap between what they have saved and what they will require due to increased longevity.
This is a serious issue in other developed nations as well such as the United Kingdom, Canada, Australia and the Netherlands. In Japan the problem is even more acute with men having a gap of 15 years and women’s gap being nearly 20 years. (3)
This situation has become even more urgent because of the COVID pandemic. “In March and April (of 2020), women accounted for 55% of the job losses.” (5) As people returned to work in the US following lockdowns, women have not returned to work in the same number as men. The workforce participation rate for men in October 2021 was 67.6, while the rate for women was 56. This employment gap will continue to affect the earning and savings ability for women. (6)
“Couple that with the disproportionate impact of job losses on women during this pandemic, and it could have a devastating economic impact on families, as well as women’s long-term earnings and career advancement.” (5)
The WEF report states “older individuals are going to need a more diverse range of financial tools to help protect against longevity risk.” (1)
“Several studies/ research papers have found that when faced with the complexity of the retirements landscape, people were prone to “switch off” and defer decision-making or simply chose the path of least resistance.” (2)
“With populations around the world living longer than ever before, we need far more creative decumulation solutions for longevity protection” says Rich Nuzum, President, Wealth at Mercer. (3)
“In order to effectively address the growing retirement savings gap, it is also critical to optimize the investment of these savings to enable individuals to achieve good retirement outcomes with the money they have invested.” The study explains,” A good retirement outcome provides a person with adequacy (a retiree’s needs are provided for), is sustainable (the risk of outliving one’s savings is low) and is flexible (allows individuals to respond to life events).” (2)
Based on these assumptions alone it is clear that as we approach retirement, we need to identify strategies that will help us manage these risks in retirement. How can we keep up with inflation, make sure we don’t outlive our money, and create a guaranteed income stream?
For savers and retirees, variable annuities can help provide guaranteed retirement income. These types of annuities create a lifetime guaranteed income stream while giving the investor the ability to stay invested in the market. If the market declines, they will continue to get their stream of income. *
By contrast, it’s possible that someone invested in the market without such guarantees, drawing income and experiencing a down draft in the market they may find themselves running out of money during retirement.
This fear, running out of money during retirement, is people’s number one fear according to several recent studies. (4)
If you want to create a secure retirement income while investing in the market, please reach out to me to discuss options that can help you protect your lifestyle regardless of what happens in life. Email me at firstname.lastname@example.org
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2021-129238 exp 11/2023