In a study conducted by Genworth Financial, retirees are underestimating their retirement expenses and are retiring earlier than planned. Eric Taylor, Vice President at Genworth, says that the study found that while many are expecting to work beyond the age of 65, the average age is closer to 61-62, with almost half leaving full-time employment sooner than they expected.
Taylor says that the changes in medical technology are making the likelihood that longevity continues to be a risk and perhaps a greater risk for future retirees than current retirees. In Genworth's research, they recommend it's best not to rely on the rules of thumb but to take the time to really write down situations, your own sources of reliable and guaranteed income and what expectations are for essential expectations and what's going to make retirement worth living for you.
Annuities are a viable option and Taylor says you can't just look at what's worked historically for what will work in the future. A lot of studies created in the past were done during time of much higher interest rates. One thing that hasn't changed, Taylor says, is the idea of risk pooling and mortality pooling and how annuity products can use the idea of pooling a large number of people together to create better outcomes than they can on their own.
The study also found that owners of annuities tended to be much more confident about their retirement prospects and the stability of their lifestyle than those who didn't. This has a lot to do with taking the time to make a stable plan, says Taylor.
One surprising outcome of the study showed that the trend of needing to spend more time planning for retirement is unchanged. Taylor says that there still exists a significant need for financial advisors to reach out to their clients to help get them started earlier with retirement planning and getting a stronger written plan in place. These are both proven strategies and will continue to be so going into the future.