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Outliving Finances in Focus: Report Highlights Growing Apprehension About Financial Security.

Key points

  1. The top concern among individuals in and preparing for retirement is the fear of outliving their assets, as reported by Cerulli Associates.
  2. Lengthening lifespans, inadequate savings, and the financial challenges facing Social Security contribute to this sense of precarity.
  3. Social Security serves as the primary source of income for over half of U.S. retirees. Even those with substantial savings rely heavily on it as their main income stream.

The Impact of Longevity and Insufficient Savings on Retirement Fears

A recent report reveals that the most significant concern among individuals in or approaching retirement is the possibility of outliving their financial resources. In a survey conducted by Cerulli Associates, a reputable provider of research, analytics, and consulting services to financial institutions, 58% of respondents from different age groups identified the fear of depleting their assets due to inadequate planning or poor investment performance as their foremost retirement apprehension.

This worry surpassed other concerns such as entrusting their finances to an unsuitable financial advisor, the potential loss of control over assets in the event of incapacity, susceptibility to scams, inflation, and other issues addressed in Cerulli’s report titled “Cerulli Edge—U.S. Retirement Edition, 2Q 2023 Issue.”

This prevailing sense of uncertainty is not surprising considering the rising life expectancies, insufficient savings, and the prevailing financial challenges affecting the Social Security system. The trustees of the program recently projected that the retirement trust fund’s reserves will be depleted by 2033 unless legislative measures are implemented to address this issue. In the absence of such measures, beneficiaries may face an automatic 23% reduction in benefits.

Although it is widely expected that lawmakers will take steps to prevent this crisis, even the current situation places a significant strain on the financial capabilities of many retirees. The Employee Benefit Research Institute reports that the median retirement savings for households led by individuals between the ages of 60 and 65, with an annual income ranging from $71,000 to $126,000, is approximately $150,000. Even among higher-earning households, the average balance is $535,000, which is still inadequate to sustain a retirement lasting several decades.

Social Security’s Dominance and the Urgency for Comprehensive Retirement Solutions

Cerulli’s research indicates that Social Security constitutes the primary source of income for 54% of retired individuals in the United States. Furthermore, within this group, one-fifth do not possess an additional secondary retirement income source. Even retirees with substantial savings acknowledged relying heavily on Social Security as their main source of income. Among households with investable assets ranging from $500,000 to $2 million, 36% identified Social Security as their primary income stream, as reported by Cerulli.

Overall, the findings of this study emphasize the pressing need for individuals and policymakers to develop well-thought-out strategies to address the retirement crisis.

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