Less than half of Baby Boomers and members of Generation X have any retirement savings at all, while Millennials are more likely to be saving for retirement, with 68% contributing to workplace retirement plans, according to a new study conducted by the Insured Retirement Institute (IRI) on behalf of Jackson National Life Insurance Company.
The report said that studies on Baby Boomers and Generation Xers found that only about one in four consumers in each of those generations expect to receive income from a pension. Fewer than one in five consumers age 25-34 expect a pension to provide retirement income, and those under age 55 are the most likely to expect their savings to be a main source of retirement income.
“Americans of all generations, along with their advisors, are acutely aware they must save money now so they can generate income in retirement,” said the report. “Consumers and advisors agree today’s investors need to save now, save more, and create a plan for how they will use those savings to ensure they have adequate income during retirement and do not outlive their financial resources.”
The study found that as consumers get older and move closer to, or into, retirement, they seem to be more reluctant to look to their savings as a source of regular monthly income.
“The dichotomy between consumers recognizing their need to use savings for retirement income and their growing reluctance to do so as they age may be explained both by a desire to preserve assets, and, for many, the lack of a clear strategy to convert a portion of their investable assets into guaranteed lifetime income—in other words, the lack of a comprehensive retirement plan, the report said.”
Across all age groups, the report found that more than half of consumers plan to dip into retirement savings by withdrawing money as needed to cover basic and discretionary spending, which it said carries a high risk of depleting assets, especially among those who live to an advanced age. Far fewer plan to transfer a portion of their savings to an annuity, or even set up a systematic withdrawal plan, the study found.
“Consumers ages 25-34 are the most interested in using an annuity-based approach,” said the report, “corresponding to this age group being both the most likely to say they plan to use their savings for income, and the least likely to say they expect to receive lifetime retirement income from a pension.”