Press Releases
June 9, 2009
New Report Demonstrates Need for Guaranteed Retirement Income Sources Such as Lifetime Annuities
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WASHINGTON, DC – The findings of a new report released today indicate that the decline in the stock market in the last six months of 2008 dramatically worsened the retirement outlook for middle-class Americans. The analysis, conducted by Ernst & Young LLP on behalf of the retirement coalition Americans for Secure Retirement (ASR), finds that due to the economic downturn, the retirement assets of recent and near retirees decreased between 14 and 17 percent in the last six months of 2008. This decline significantly reduces the likelihood that middle income retirees will have enough financial resources to last them through their lifetime.
The study also determined that many Americans will be forced to reduce their standard of living, some by as much as 51 percent, to avoid outliving their financial assets and that households with a guaranteed source of retirement income outside of Social Security, such as a lifetime annuity, showed the greatest chance of financial success. Conversely, the study found that households with no guaranteed retirement income outside of Social Security are most vulnerable to outliving their financial assets.
The new report is an update to Ernst & Young’s July 2008 Retirement Vulnerability Study. The 2008 study found that almost three out of five middle-class new retirees could expect to outlive their financial assets if they attempted to maintain their pre-retirement standard of living.
“In only 6 months, the financial downturn has had a significant adverse impact on the retirement assets of middle-income Americans and on their prospects of a secure retirement. As was the case in our 2008 study, our update finds that people with a guaranteed source of income outside of Social Security are much better positioned than those that are without guaranteed income,” said Tom Neubig of Ernst and Young.
“Now more than ever, it is critical that Americans have guaranteed retirement income through vehicles like lifetime annuities,” said Bill Waldie, Chairman of ASR. “The traditional retirement system of pensions and Social Security are increasingly no longer enough for retirees and there is a critical need for Congress and policy makers to act, to help Americans secure their retirement future.”
Findings of the report include:
- A recently retired married couple earning $75,000 a year with a defined benefit plan has a 57 percent chance that they will have enough financial resources in retirement. The same couple, without any guaranteed source of retirement income, is left with only a 6 percent chance of financial success.
- A near retiree single female, earning $50,000 a year with a defined benefit plan, has a 66 percent chance that she will not outlive her financial resources. The same female, without any guaranteed source of income in retirement, is left with only an 18 percent chance of financial success.
Solutions to this retirement challenge are currently being considered in the Congress. In the House, Representatives Earl Pomeroy (D-ND) and Ginny Brown-Waite (R-FL) have introduced the Retirement Security Needs Lifetime Pay Act, H.R. 2748. While in the Senate, Senators Kent Conrad (D-ND) and Pat Roberts (R-KS) are planning to reintroduce the Retirement Security for Life Act, a measure that received broad bipartisan support in the 110th Congress. Both bills would create greater accessibility to nonqualified lifetime annuities by creating a tax incentive to convert a portion of a person’s savings or assets into a steady “paycheck” for life. The bills would provide a 50 percent tax exclusion on the annual income from a non-qualified annuity, saving a typical American in the 25 percent tax bracket up to $5,000.
In the updated report, Ernst & Young looked at six of the original 36 typical middleincome households approaching retirement from the 2008 study, chosen because they represent retirement vulnerability across all middle-income households approaching retirement: Married couples at or near retirement making $75,000 in earnings with and without guaranteed retirement income, and single females making $50,000 in earnings seven years before retirement with and without guaranteed retirement income.
Americans for Secure Retirement (ASR) is a broad-based coalition of more than 40 organizations who are united in their commitment to ensuring retirement security for all Americans. Our members share the goal of raising awareness of the retirement problem and crafting creative solutions to help people save and prosper in their retired years. Specifically, the coalition advocates for Congress and policy makers to encourage greater access to retirement security by passing a tax incentive for lifetime annuities, the only retirement vehicle that offers a guaranteed stream of income in retirement – a steady paycheck for life.
To view the original retirement vulnerability study and the recently completed update, please visit www.paycheckforlife.org.
Click here to read the charts detailing the findings of the new report.
June 9, 2009
Bill Includes Increased Access to Guaranteed Retirement Income
WASHINGTON, DC – The Americans for Secure Retirement (ASR) coalition today applauded introduction in the U.S. House of Representatives of crucial retirement legislation. H.R. 2748, the Retirement Security Needs for Life Act, introduced by Representatives Earl Pomeroy (D-ND) and Ginny Brown-Waite (R-FL) provides incentives for Americans to secure retirement vehicles that provide a steady stream of income for life.
The Retirement Security Needs Lifetime Pay Act would encourage retirees to receive some of their retirement savings in the form of guaranteed lifetime income. Included in the bill is a provision that would give a 50 percent tax exclusion on the annual income from a non-qualified lifetime annuity, up to $10,000 per year. A lifetime annuity is the only financial vehicle that delivers a steady stream of income for life- a paycheck for life.
“Retirement security is an increasing concern for Americans as traditional sources of retirement income become less reliable. Representatives Pomeroy and Brown-Waite should be commended for recognizing the importance of encouraging Americans to plan for retirement with options, such as lifetime annuities, that provide a steady stream of income in retirement,” said William Waldie, Chairman of ASR.
Additionally, the bill would exclude from taxes, a portion of income payments from Individual Retirement Accounts (IRAs), and qualified retirement plans other than defined benefit plans.
In the last Congress, the Retirement Security for Life Act, a bill which provided for the same 50% tax exclusion for income received in retirement from a lifetime annuity, received broad support from 79 cosponsors from both sides of the aisle.
Studies looking at the retirement readiness of middle-income Americans have concluded that households with guaranteed retirement income in addition to Social Security face a much more certain financial future in retirement than those with out. A 2008 study conducted by Ernst & Young on behalf of ASR, prior to the U.S. financial market declines, showed that nearly three fifths of middle income retirees could expect to outlive their savings.
“With the recent economic down turn, many Americans, including many in the agricultural sector who do not have employer retirement plans, watched their retirement savings drastically decrease. Now more than ever, middle-class Americans will have to evaluate their retirement savings to ensure they do not outlive their financial resources,” said Marcie Williams, President of American Agri-Women, an ASR coalition member.
ASR is a coalition that works with women, minorities, farmers, small businesses, and the life insurance industry to raise awareness about the issues surrounding retirement. For more information on ASR and its mission or to obtain a copy of the recent Ernst & Young study visit www.paycheckforlife.org.
July 14, 2008
Future Retirees without Guaranteed Income Will Need to Significantly Reduce Standard of Living
Washington – Almost three out of five new middle-class retirees will outlive their financial assets if they attempt to maintain their pre-retirement standard of living, according to a new study conducted by Ernst & Young LLP on behalf of Americans for Secure Retirement.
The study also finds that middle-income Americans entering retirement now will have to reduce their standard of living by an average of 24 percent to minimize the likelihood of outliving their financial assets. Those Americans seven years out from retirement are even less prepared and the study estimates that they will have to reduce their standard of living by even more, an average of 37 percent. These reductions will be necessary even when assuming that retirees can maintain the same standard of living with income equal to 59 to 71 percent of their pre-retirement wages.
“Many Americans envision a retirement where their lifestyle continues much as before,” said Tom Neubig of Ernst & Young. “Our work shows that this is not a realistic expectation and that, with the current state of savings and potentially very long life expectancies, many retirees will have to cut back far more on expenditures than they had ever expected.”
The study finds that retirees are much better prepared to have a financially secure retirement if they have a guaranteed source of retirement income beyond Social Security, such as an annuity or defined benefit plan. For example, married couples who have a guaranteed source of retirement other than Social Security income making $75,000 at retirement have a 31 percent chance of outliving their financial assets if they retain their pre-retirement standard of living. Those with Social Security as their only guaranteed income have a 90 percent chance of outliving their financial assets during retirement.
“As a guaranteed source of retirement income, life annuities relieve the risks and burdens of managing a nest egg and can maximize savings’ value over the course of an individual’s retirement years,” said Joe Reali, Chairman of the Americans for Secure Retirement coalition. “Life annuities are the only vehicle besides pensions and Social Security that provide a steady stream of income for life – a “paycheck for life.”
The report was conducted by Ernst & Young on behalf of Americans for Secure Retirement, a coalition of over 50 member and affiliate organizations representing women’s, small business, agriculture, Hispanic and African American groups as well as the life insurance industry. The coalition is committed to raising awareness about retirement challenges facing Americans and advocating for policies that help Americans secure a steady stream of income for their retirement.
Other key findings of the study include:
- Persons that are 5-10 years away from retirement have a higher risk of outliving their financial assets than those currently at retirement age. To avoid outliving their retirement assets, these workers aged 55 to 59 will have to increase their savings substantially or work beyond age 65. Otherwise, they will have to reduce their standard of living significantly more than today’s retirees to minimize the risk of exhausting their financial assets.
- Married couples are more likely to outlive their financial assets, due to their longer joint life spans, than single households.
- Montana, Wyoming and South Dakota citizens have the highest likelihood of outliving retirement savings.
- D.C., Rhode Island, Utah and New York citizens have the least likelihood of outliving retirement savings.
“The findings of this report underscore that the public policy debate on retirement needs to increasingly focus on how to help Americans manage their retirement savings so that they last throughout retirement. This includes pursuing policies that encourage retirement vehicles that provide retirees with steady streams of income for their retirement,” said Reali.
Legislation currently before Congress, The Retirement Security for Life Act (H.R. 2205/S. 1010), would encourage Americans to secure a steady stream of income in retirement through annuitization. The bills will encourage Americans to have a steady source of guaranteed income in retirement providing a tax incentive for lifetime annuities. Specifically, this legislation would exclude 50 percent of the income received from a lifetime annuity from taxation, up to $20,000 per year. For an average American taxpayer in the 25 percent tax bracket, this would result in $5,000 of tax savings. The legislation, introduced by Senators Gordon Smith (R-OR) and Kent Conrad (D-ND) in the Senate and Representatives Stephanie Tubbs-Jones (D-OH) and Phil English (R-PA), has the support of 70 co-sponsors in the House and 12 in the Senate.
About the Study
The study evaluates retirement vulnerability for 36 different types of typical middle-class households, defined by three income levels ($50,000, $75,000 and $100,000 of pre-retirement income); for married couples, single males and single females; by employer provided defined benefit pension coverage status; and by age (near and new- retiree). The near-retiree is age 58, and planning to retire at age 65. The recent retiree is age 65 and has just entered retirement. Based on government data available to the public, the study estimates the key financial and income information for these 36 household types. Based on the relative weights of the different household examples, the study estimates with E&Y’s Retirement Analytics™ model the national overall retirement vulnerability of middle-class near and new-retirees.
About Americans
Americans for Secure Retirement is a coalition of over 50 member and affiliate organizations representing women’s, small business, agriculture, Hispanic, and African American groups as well as the life insurance industry. The coalition is committed to raising awareness about the retirement challenges facing Americans and advocating for policies that help Americans secure a steady stream of income for their retirement. For more information on ASR and the importance of retirement vehicles that help individuals make their income last a lifetime, please visit www.paycheckforlife.org.
May 7, 2008
Women are at a much higher risk than men of facing economic uncertainty in retirement and, on average, they’ll enter retirement with considerably less savings than men. Women face these unique challenges because they spend fewer years in the workforce, earn less income and have longer life spans than men, according to a report released today entitled, “The Female Factor 2008: Why Women are at Greater Financial Risk in Retirement.”
October 30, 2007
One in Six Voters Have No Formal Retirement Plan; Overwhelming Voter Support for Annuity Incentive
WASHINGTON, D.C. – Forty-five percent of American voters are not confident they will have the money to cover even their fixed monthly costs during retirement and one in six voters, or approximately 20 million voters, have no retirement plan at all according to a new national survey released today by Americans for Secure Retirement (ASR). The survey also finds broad support for tax incentives for lifetime annuities, which help strengthen financial security in retirement.
The bipartisan poll of likely voters was conducted by Democratic pollster Mark Mellman of the Mellman Group and Republican pollster Bill McInturff of Public Opinion Strategies.
“A very dark cloud is hanging over the retirement prospects of many voters,” Mark Mellman president of the Mellman Group said. “Quite simply, they are worried about how they’re going to pay for it. As more citizens begin to face the realities of paying for retirement, this will become an increasingly important issue for congress and policy makers to address.”
Voters Want Incentives to Plan for the Long Haul
The first of our nation’s 77 million baby boomers qualify for Social Security benefits this year, highlighting the need for proactive retirement planning. Employer sponsored 401(k) plans, whose adoption has been fueled in large part by employer and employee tax benefits, are increasingly replacing the retirement space once filled by defined benefit plans.
For those Americans without access to an employer sponsored retirement plan, lifetime annuities are often the best option to ensure that their savings last throughout retirement. In fact, voters who own annuities are much more confident about their retirement prospects than those who do not own an annuity. A wide range of voters own annuities, with 56 percent of owners reporting incomes of $80,000 or less. However, these retirement plans lack the tax benefits associated with 401(k) and other qualified savings plans.
The survey found an overwhelming 69 percent majority of voters favoring a proposal to reduce the tax burden on those who purchase annuities to help pay for retirement. Support for this proposal extends across all demographic groups. The bi-partisan Retirement Security for Life Act of 2007, would provide a 50 percent tax exclusion on income from payout of a lifetime annuity.
“With traditional pensions disappearing, a lifetime annuity is one of the few remaining ways people can ensure a steady stream of income through retirement,” said ASR Chairman Harvey Blitz. “This poll demonstrates that voters are worried that they won’t be able to pay for retirement and they want Congress’ help. Bipartisan legislation in Congress would provide a real tax incentive for Americans to secure a steady paycheck for life, something that has broad support among voters.” Blitz said.
The poll was conducted September 12 -16, 2007 among a random sample of 1,000 likely 2008 general election voters. It has a margin of error of +/- 3.1 percent (higher for subgroups).
Americans for Secure Retirement – a coalition of 39 members representing women’s, small business, agriculture, Hispanic, and African American groups as well as the life insurance industry – advocates for The Retirement Security for Life Act of 2007 (S. 1010/H.R. 2205) which would provide a 50 percent tax exclusion on the income from the payout of individual lifetime annuity, up to $20,000 per year, and would encourage Americans to secure a steady paycheck for life. For an average American taxpayer in the 25 percent tax bracket, this would result in $5,000 of tax savings. For more information on ASR or the poll, please visit www.paycheckforlife.org.
KEY FINDINGS
Americans for Secure Retirement (ASR) commissioned a poll to look at whether Americans were concerned about their financial security in retirement. The poll was conducted between September 12-16, 2007 by The Mellman Group and Public Opinion Strategies. The poll consisted of interviews with 1,000 likely 2008 general election voters. It has a margin of error of +/- 3.1 percent.
- Voters are concerned about their financial security in retirement
- 45% of voters are concerned they will not have enough assets to cover even their most basic fixed monthly costs in retirement
- Women are particularly worried about their financial retirement security. 47% of women are not sure they will be able to enjoy retirement security.
- The same holds true for middle-income voters. 57% of those earning between $30,000 – $50,000 and 43% of those earning between $50,000 – $80,000 are concerned about being able to cover their basic living costs in retirement.
- One 1 in 6 voters, or 17%, said they have no retirement vehicle, other than Social Security, to provide them with financial security in retirement
- 56% said they had a 401K or similar type plan., 50% a pension plan, and 49% an IRA
- Of those with no retirement plans, 25% are African-Americans, 25% earn less than $30,000 per year, 18% are middle income and 17% are retired.
- Nearly a third of voters (32%) expect that Social Security will pay for at least a great deal of their retirement
- Another 31% expect to rely on their pension plans and 401K plan respectively
- 19% expect to pay for their retirement by continuing to work.
- Voters “strongly” support tax incentive for annuities.
- 69% of voters support a tax incentive for annuities that would reduce by 50% the tax on retirement income received from an annuity. Only 18% opposed it.
- Support is very intense, with 56% of respondents “strongly” supporting the tax incentive
- Support for tax incentive for annuities strong and robust across age, political, gender and demographic lines
- 70% of women support the tax incentive
- 64% of African-Americans, 66% of Hispanics and 71% of whites expressed their support
- Middle income voters strongly support the proposal. 65% of those earning between $30,000 and $50,000 and 73% earning between $50,000 and $80,000 expressed their support.
- 67% of Democrats, 78% of Republicans and 61% of independents approved of the tax incentive
- Support also cut across regions – 74% in the South, 70% in the Midwest, 67% in the West and 61% in the Northeast.