Retirees with a Guaranteed Income are Happier and Live Longer
Dee Costa, Sr. VP Business Consultant
Retirement happiness seems to be big news these days. Economists have been doing work in the emerging field of “happiness research” and have started to publish their findings. According to Time Magazine, The Wall Street Journal, and LIMRA, retirees who have a guaranteed paycheck coming in every month for the rest of their lives are much happier. These studies show they actually live longer too!
This makes sense because the number one worry of retirees is running out of money. Retirees who have a set income for life remove a great deal of stress from their lives. Prior generations used to get that guaranteed income from Social Security and a traditional pension to cover their basic living expenses. But few employers now provide pensions, putting the onus of saving on the employee. Social Security payments equal only about 40% of the average wage earners pre-retirement income.
How do we provide our clients and ourselves the additional guaranteed income? How do we fill that income gap to create a steady paycheck for meeting basic needs? Income annuities provide an often-overlooked solution. Most annuities offer an option for guaranteed lifetime income.
As mentioned above, research shows that annuities provide both psychic and financial benefits. According to the LIMRA Secure Retirement Institute Study, retired annuity owners feel more confident they’ll be able to afford their preferred retirement lifestyles than retirees who do not own an annuity – even if they live to age 90 or older.
The study released Feb. 20th found that 73% of retirees who own an annuity believe they will be able to live the retirement lifestyle they want, compared with just 64% of retirees who don’t. Nearly 7 in 10 retirees who own an annuity are more confident their savings and investments will not run out if they live to age 90, compared with 57% of retirees who don’t own an annuity. An annuity offers a solution for creating long-term income security along with the happiness that goes along with that.
The world has changed in the last year and no-one can really predict what’s ahead, but retirees are less interested in having all their retirement assets at risk.
Carl Richards, CFP and Sketch Guy commented “Risk is an arbitrary concept until you experience it. Talking about being punched in the face is different from actually being punched in the face.”
Markets shed 40% back in March as efforts to slow the spread of coronavirus drove the economy to a near halt. Though they bounced back remarkably fast, the economic outlook is uncertain, unemployment is high, and volatility is expected to remain until COVID -19 vaccines are widely distributed and are finally bringing the pandemic under control.
We’re in uncharted waters, and our life rafts may not work the way they used to. After years and years of printing money, bond yields remain paltry. De-risking into higher allocation of bonds for the “fixed or guaranteed” income appears to no longer be as effective as it once was. Most economists are not bullish on the outlook for bonds over the near future.
Everyone we meet has a threshold for risk, but the vast majority of those retiring today are looking for ways to create that personal pension, that flow of guaranteed paychecks in retirement. A well-diversified portfolio allows our clients, through the use of annuities, to create that guaranteed income stream to fill the gap for living essentials, and still remain in the market for longer term growth.
Most retirees want a steady paycheck to cover their monthly necessities, they want to know that if the market bounces around that their retirement paycheck continues regardless. If they are telling economists and researchers that this makes them happier, and we know from the studies it actually leads to a longer life, we are in a perfect position to help our clients eliminate fear and embrace a happy retirement. As Tom Hegna says, “Don’t Worry, Retire Happy”.