A recent study revealed that 79 percent of Americans plan to continue working once they’re retired, according to Ben Steverman’s 2017 article, Working Past 70: Americans Can’t Seem to Retire.
Why do so many expect to postpone a typical, leisure-filled retirement?
One of many theories points out the decline of pensions and the need to replace the income stream that used to come – guaranteed – from a past employer. Today, only 48 percent of private-sector employers offer defined contribution or traditional defined benefit pension plans (Employee Benefits Survey, Retiree Benefits,” Bureau of Labor Statistics, March 2017). And traditional defined benefit plans are disappearing. In 2015, just 20 percent of Fortune 500 companies offered defined benefit pensions to new employees, according to Jerry Geisel in his Feb. 22, 2016, article in Business Insurance, Fortune 500 Continues to Shed Pension Plans.
With private pensions becoming more rare, guarantees in retirement may be few and far between, but it doesn’t make them any less important.
For starters, guarantees might make people happier. Research suggests that retirees get more satisfaction from each dollar of Social Security and pension income than they do from any other source of income (What Makes a Successful Retirement? Research, February 2014). That’s because they’re more likely to be confident spending money when they know another check is right around the corner.
Guarantees can also help someone be a more confident investor through market ups and downs. Guarantees can be the guardrails needed to stay the course when investing, knowing there is some protection built into a portfolio. And with Americans living longer than ever before, guarantees in an overall retirement plan, which can be provided by annuities, may help assure that the money lasts as long as it’s needed. Guarantees are based on the claims-paying ability of the issuer.
Just as no two retirements are alike, not all guarantees are alike, so it’s important to understand the options available and to identify what, guarantees are also priorities.
Tony Edwards is principal with WealthMark Financial Solutions, LLC, and can be reached at 334-279-1987.
WealthMark Financial Solutions, LLC is not owned or operated by New York Life or its affiliates. Neither New York Life nor its agents provide tax, legal or accounting advice. Please consult with your professional advisor for tax, legal or accounting advice.