Retirement Income Insights from New York Life

Transcription

1 Retirement Insights from New York Life 1

2 Trends Retirement is More Complex than Retirement Insights from New York Life Beginning the Dialogue: Wealth Management for Retirees 2

3 Retiree Behavior: Perception vs. Reality While lower-wealth retirees have an income gap at older ages, affluent households are net savers. Net Spenders: 25th Percentile of Investable Assets (Average of $11,896 in investable wealth at age ) $40K $35K $30K $25K $20K $15K $10K $5K $K Net Savers: 75th Percentile of Investable Assets (Average of $284,270 in investable wealth at age ) $120K $100K $80K $60K $40K $20K $K Consumption Values above show annual income and consumption for households broken into 5 year age cohorts. The household's age is the female spouse's age if there is one, or the respondent's age otherwise. was surveyed in 2010 and expenses in Households were segmented into percentiles based on their level of non-housing wealth as surveyed in To find the income and consumption values, spending and consumption values for households across a 20 percentile range were averaged. For example, to find the 25th percentile values, households from the 15th to 35th percentiles were averaged. Source: University of Michigan Health and Retirement Study (HRS), sponsored by the National Institute on Aging. 3

4 is Driven by Social Security and Pensions There is a higher incidence of pension income among affluent retirees than conventional wisdom would suggest. Net Spenders: 25th Percentile of Non-Housing Assets (Average of $11,896 in non-housing wealth at age ) Consumption Matchers: 75th Percentile of Non-Housing Assets (Average of $284,270 in non-housing wealth at age ) $50K $40K $30K $20K $10K $K $120K $100K $80K $60K $40K $20K $K Social Security Inc Pension/Annuity Inc Capital Inc Labor Inc Other Inc Consumption Values above show annual income and consumption for households broken into 5 year age cohorts. The household's age is the female spouse's age if there is one, or the respondent's age otherwise. was surveyed in 2010 and expenses in Households were segmented into percentiles based on their level of non-housing wealth as surveyed in 2010.To find the income and spending values, spending and income values for households across a 20 percentile range were averaged. For example, to find the 25th percentile values, households from the 15th to 35th percentiles were averaged. The income bar chart is segmented by the key components of income. The component values were found by the same averaging method as the total income and consumption values (averaging across a 20 percentile range). Source: University of Michigan Health and Retirement Study (HRS), sponsored by the National Institute on Aging. 4

5 Real Consumption Declines Throughout Retirement Also contrary to conventional wisdom, affluent retirees real consumption declines throughout retirement, particularly in later years as mobility becomes more limited. Net Spenders: 25th Percentile of Non-Housing Assets (Average of $11,896 in non-housing wealth at age ) Consumption Matchers: 75th Percentile of Non-Housing Assets (Average of $284,270 6 in non-housing wealth at age ) $45K $40K $35K $30K $25K $20K $15K $10K $5K $K $120K $100K $80K $60K $40K $20K $K Health Home Related Food Transportation Cloth/Ent/Other Values above show annual income and consumption for households broken into 5 year age cohorts. The household's age is the female spouse's age if there is one, or the respondent's age otherwise. was surveyed in 2010 and expenses in Households were segmented into percentiles based on their level of non-housing wealth as surveyed in To find the income and spending values, spending and income values for households across a 20 percentile range were averaged. For example, to find the 25th percentile values, households from the 15th to 35th percentiles were averaged. The expenses bar chart is segmented by the key components of spending. The component values were found by the same averaging method as the total income and spending values (averaging across a 20 percentile range). 5

6 It s Become Less About Funding the Gap. It s more about maximizing guarantees and guaranteed sources of income. Retired Americans with more savings match consumption to income. While retirees have more investable assets, they are not touching their nest egg. Creating Confidence in Retirement - Methods to Increase Retirement Readiness 6

7 It s About More Retirees may be better prepared for retirement than you think Today s retirees still have significant pension income Real consumption declines during retirement Evidence suggests that the retirees with more savings aren t SWPing rather, they are spending their after-tax income Negative messaging about retirement may not apply to some retirees What if you live too long? What if you run out of money? You probably haven t saved enough for retirement. We believe a key message to is how to achieve more 7

8 Ironically Though, Retirees Will Demand Simplicity When considering their most important income objectives in retirement, clients may want More More Stability More Capital Growth Abundance Confidence Wealth Better Living Sustainability Legacy or a combination of these objectives. 8

9 Client s Needs Drive Class Selection Depending on a client s objective, risk tolerance, and time horizon, different income classes may be appropriate. Class Performance Client s Objective Metric 1 st 2 nd 3 rd 4 th More Average Annual 1 Insured Fixed Traditional Fixed Insured Equity Traditional Equity More Stability Standard Deviation of Annual 2 Insured Fixed Insured Equity Traditional Equity Traditional Fixed More Capital Growth Capital Growth 3 Traditional Equity Traditional Fixed Insured Equity Insured Fixed Because of the purely hypothetical nature of the information presented based on certain assumptions, it does not represent any specific product; no client actually had, or could have had, the results and income characteristics shown for a specified period. This is based on historical data as described on the Assumptions page. Past performance is no guarantee of future results. 1 Average Annual : The average annual income generated across a 30 year retirement period. 2 Standard Deviation of Average Annual : The standard deviation of annual income across a 30 year retirement period. 3 Capital Growth: For a $100,000 investment, the accumulated account balance at the end of a 30 year retirement period. 9

10 Certainty is Created by Reducing the Unknown Retirees who own long term care insurance consume more across every spending category than similarly-situated retirees without long term care insurance. $40K $35K $30K $25K $20K $15K $10K $5K $K Do Not Own LTCi Median spending for Individuals 65+ Own LTCi Health Home Related Food Transportation Cloth/Ent/Other Values above show median spending in each category of spending for retirees 65 years and older in Data comes the Employee Benefit Research Institute's (EBRI) February 2012 Issue Brief "Expenditure Patterns of Older Americans, " by Sudipto Banerjee. EBRI used data from the University of Michigan's Health and Retirement Survey (HRS). 10

11 A complement to ongoing sales initiatives Enhance current sales skills Generate quality referrals Increase awareness of retirement income issues Initiate client contact Identify additional assets Develop retirement income strategies 12

12 Help clients get organized Explores the strong link between personal organization and personal finances Helps advisors to: Create a comprehensive investment strategy Ensure continuity of assets among family members Critical tool in helping to organize an estate Enhance existing client relationships Identify additional assets Generate referrals 13

13 Address women s unique retirement planning challenges Helps women take steps toward organizing their finances and establishing an investment strategy Helps advisors to: Create a comprehensive investment strategy Ensure continuity of assets among family members Organize an estate Enhance existing client relationships Identify additional assets Generate referrals 14

14 Thank you! FOR BANK OF AMERICA/MERRILL LYNCH REGISTERED REPRESENTATIVE USE ONLY. 15