Latest news with #DavidBlanchett
Ya Libnan
26-04-2025
- Business
- Ya Libnan
Americans are more worried about running out of money in retirement than dying, report
Many Americans are worried they'll run out of money in retirement, but experts offer ways to reduce that risk In fact, a new survey from Allianz Life finds that 64% Americans worry more about running out of money than they do about dying. Among the reasons cited for those fears include high inflation, Social Security benefits not providing enough support and high taxes. The fear of running out of money was most prominent for Gen Xers who are approaching retirement. However, a majority of millennials and baby boomers also said they worry about their money lasting, according to the online survey of 1,000 individuals conducted between January and February. Separately, a new Employee Benefit Research Institute report finds most retirees say they are living the lifestyle they envisioned and are able to spend money within reason. Yet more than half of those surveyed agreed at least somewhat that they spend less because of worries they will run out of money, according to the survey of more than 2,700 individuals conducted between January and February. Meanwhile, a Northwestern Mutual survey reported that 51% of Americans think it's 'somewhat or very likely' they will outlive their savings. The survey polled 4,626 U.S. adults aged 18 and older in January. Since those studies were conducted, new tariff policies have caused disturbance in the stock markets and prompted speculation that inflation may increase. Meanwhile, new leadership at the Social Security Administration has prompted fears about the continuity of benefits. Those headlines may negatively affect retirement confidence, experts say. With employers now providing a 401(k) plan and other savings plans versus pensions, it is largely up to workers to manage how much they save heading into retirement and how much they spend once they reach that life stage. That responsibility can also lead to worries of running out of money in the future, experts say. How to manage the 'fear of outliving your resources' Because of the unique risks every individual or couple faces when planning for retirement, the best approach is typically to transfer some of that burden to a third party, said David Blanchett, head of retirement research at PGIM DC Solutions. Creating a guaranteed lifetime income stream that covers essential expenses can help reduce the financial impact of any events that require retirees to cut back on spending, Blanchett explained. That should first start with delaying Social Security benefits, he said. While eligible retirees can claim benefits as early as 62, holding off up until age 70 can provide the biggest monthly benefits. Social Security is also unique in that it provides annual adjustments for inflation. Next, retirees may want to consider buying a lifetime income annuity that can help amplify the monthly income they can expect. Admittedly, those products can be complicated to understand. Therefore Blanchett recommends starting out by comparing very basic products like single premium immediate annuities that are easier to compare. 'Unless you do those things, you just can't get rid of that fear of outliving your resources,' Blanchett said. Without a guaranteed income stream, retirees bear all of the financial risk themselves, he said. 'Retirement could last 10 years; it could last 40 years,' Blanchett said. 'You just don't know how long it's going to be.' Among retirees, there has been some hesitation to buy annuities, said Craig Copeland, EBRI's director of wealth benefits research. Such a purchase requires parting with a lump sum of money in exchange for the promise of a guaranteed income stream. 'We see great increase in interest, but we aren't seeing upticks in take up yet,' Copeland said. 'I do think that's going to start to change.' What can help boost retirement confidence To effectively plan for retirement, it helps to seek professional financial assistance, experts say. Meanwhile, few people have a plan of their own for how they may live on the assets they've worked hard to accumulate, according to Kelly LaVigne, vice president of consumer insights at Allianz Life. 'This is something that you should not plan on doing on your own,' LaVigne said. While the survey from Northwestern Mutual separately found individuals think they need $1.26 million to retire comfortably, the real number individuals need is based on their personal situation, said Kyle Menke, founder and wealth management advisor at Menke Financial, a Northwestern Mutual company. In thinking about how life will look in 30 years, there are a variety of things to consider, Menke said. This includes stock market returns, taxes, inflation and medical expenses, he said. Even people who have enough money for retirement often don't feel confident in their ability to manage all of those factors on their own, he said. Financial advisors have the ability to run different simulations and stress test a plan, which can help give retirees and aspiring retirees the confidence they're lacking. 'I think that's where the biggest gap is,' said Menke, referring to the confidence Americans are lacking without a plan. NBC NEWS
CNBC
25-04-2025
- Business
- CNBC
Americans are more worried about running out of money in retirement than dying. Experts offer ways to reduce that risk
Many Americans are worried they'll run out of money in retirement. In fact, a new survey from Allianz Life finds that 64% Americans worry more about running out of money than they do about dying. Among the reasons cited for those fears include high inflation, Social Security benefits not providing enough support and high taxes. The fear of running out of money was most prominent for Gen Xers who are approaching retirement. However, a majority of millennials and baby boomers also said they worry about their money lasting, according to the online survey of 1,000 individuals conducted between January and February. Separately, a new Employee Benefit Research Institute report finds most retirees say they are living the lifestyle they envisioned and are able to spend money within reason. Yet more than half of those surveyed agreed at least somewhat that they spend less because of worries they will run out of money, according to the survey of more than 2,700 individuals conducted between January and February. More from Personal Finance:Nearing retirement? These strategies can protect from tariff volatilityExperts see higher stagflation risks. Here's what it means for your moneyShould investors dump U.S. stocks for international equities? What experts think Meanwhile, a Northwestern Mutual survey reported that 51% of Americans think it's "somewhat or very likely" they will outlive their savings. The survey polled 4,626 U.S. adults aged 18 and older in January. Since those studies were conducted, new tariff policies have caused disturbance in the stock markets and prompted speculation that inflation may increase. Meanwhile, new leadership at the Social Security Administration has prompted fears about the continuity of benefits. Those headlines may negatively affect retirement confidence, experts say. With employers now providing a 401(k) plan and other savings plans versus pensions, it is largely up to workers to manage how much they save heading into retirement and how much they spend once they reach that life stage. That responsibility can also lead to worries of running out of money in the future, experts say. Because of the unique risks every individual or couple faces when planning for retirement, the best approach is typically to transfer some of that burden to a third party, said David Blanchett, head of retirement research at PGIM DC Solutions. Creating a guaranteed lifetime income stream that covers essential expenses can help reduce the financial impact of any events that require retirees to cut back on spending, Blanchett explained. That should first start with delaying Social Security benefits, he said. While eligible retirees can claim benefits as early as 62, holding off up until age 70 can provide the biggest monthly benefits. Social Security is also unique in that it provides annual adjustments for inflation. Next, retirees may want to consider buying a lifetime income annuity that can help amplify the monthly income they can expect. Admittedly, those products can be complicated to understand. Therefore Blanchett recommends starting out by comparing very basic products like single premium immediate annuities that are easier to compare. "Unless you do those things, you just can't get rid of that fear of outliving your resources," Blanchett said. Without a guaranteed income stream, retirees bear all of the financial risk themselves, he said. "Retirement could last 10 years; it could last 40 years," Blanchett said. "You just don't know how long it's going to be." Among retirees, there has been some hesitation to buy annuities, said Craig Copeland, EBRI's director of wealth benefits research. Such a purchase requires parting with a lump sum of money in exchange for the promise of a guaranteed income stream. "We see great increase in interest, but we aren't seeing upticks in take up yet," Copeland said. "I do think that's going to start to change." To effectively plan for retirement, it helps to seek professional financial assistance, experts say. Meanwhile, few people have a plan of their own for how they may live on the assets they've worked hard to accumulate, according to Kelly LaVigne, vice president of consumer insights at Allianz Life. "This is something that you should not plan on doing on your own," LaVigne said. While the survey from Northwestern Mutual separately found individuals think they need $1.26 million to retire comfortably, the real number individuals need is based on their personal situation, said Kyle Menke, founder and wealth management advisor at Menke Financial, a Northwestern Mutual company. In thinking about how life will look in 30 years, there are a variety of things to consider, Menke said. This includes stock market returns, taxes, inflation and medical expenses, he said. Even people who have enough money for retirement often don't feel confident in their ability to manage all of those factors on their own, he said. Financial advisors have the ability to run different simulations and stress test a plan, which can help give retirees and aspiring retirees the confidence they're lacking. "I think that's where the biggest gap is," said Menke, referring to the confidence Americans are lacking without a plan.
Associated Press
08-04-2025
- Business
- Associated Press
RETIREES SPEND THEIR LIFETIME INCOME, RATHER THAN SAVINGS
A New Study by Retirement Income Institute Fellows David Blanchett and Michael Finke Finds Retirees Spend More with Lifetime Income WASHINGTON, April 8, 2025 /PRNewswire/ -- Even if they can easily afford it, retirees are reluctant to spend savings for a more enjoyable lifestyle. Instead, retirees spend significantly more from their sources of lifetime income – such as Social Security, pensions, and/or annuities – than they do from their savings in IRAs and other retirement accounts. Those findings are part of a new research study, " Retirees Spend Lifetime Income, Not Savings,' by David Blanchett and Michael Finke, Research Fellows in the Retirement Income Institute (RII) at the Alliance for Lifetime Income. This research builds on their groundbreaking RII paper last year – 'Guaranteed Income: A License to Spend' which demonstrated that people can enjoy retirement more fully if they allowed themselves to spend money more freely. 'Overall, the analysis suggests that converting savings into lifetime income could increase retirement consumption significantly, especially for married households,' the study notes. 'Our analysis clearly demonstrates that households spend differently across sources of wealth. Retirees spend a much higher percentage of their lifetime income (about 80%) and spend about half the amount that they could safely spend from other sources.' The study also found retirees spend a higher rate of their savings after the federal government requires distributions from their retirement savings accounts. Retirees seem to view the forced asset distribution – known as Required Minimum Distributions (RMDs) – as income and spend it at a higher rate than they spend from other savings. RMDs are the minimum amounts people must withdraw annually starting at age 73 from qualified investment accounts to avoid penalties to the IRS. Accounts subject to RMDs include traditional IRAs, SEP IRAs, and most employer-sponsored retirement plans like 401(l)s. 'Overall, these findings have important implications for the current and future state of retirement in the United States given the rise of defined contribution (DC) plans as a more prevalent funding source for retirement,' the authors say. 'DC plans are principally focused on growing assets and typically are not explicitly focused on generating income. Therefore, unless steps are proactively taken to ensure retirees effectively use savings to fund spending, this analysis suggests households are likely to continue under-consuming in retirement potentially at even greater levels.' Blanchett and Finke point out steps can be taken to help retirees view their savings as income and therefore feel freer to spend: 'Financial institutions that are aware of the tendency to bracket investment decisions differently than lifetime income can focus on reframing wealth as income or automatically liquidate investments to create the appearance of income. For example, managed payout funds designed to distribute a percentage of wealth each year can help retirees frame savings as income.' The Fear of Knowing How Much You Can Spend Part of the reason retirees are reluctant to spend more freely is the complexity of navigating a retirement system designed with a focus on saving and investing (accumulation) rather than spending (decumulation of assets). 'Estimating how much income can be withdrawn from investments in retirement is far more complex than receiving a monthly pension payment,' the study notes. Complicating factors for retirees trying to determine how much to spend every year include a 'limited financial knowledge, an unknown lifespan' and 'an array of available financial resources to consider, including Social Security, pension, wages, and investment assets inside and outside of retirement accounts…" To better understand how people 65 and older are spending money, the study's authors analyzed data from the Health and Retirement Study, which is an ongoing nationally representative survey of approximately 20,000 Americans over 50 and supported by the Social Security Administration and National Institute on Aging. In the new RII study by Blanchett and Finke, two broad categories of available financial resources or assets were considered – income and savings: Income was separated into three groups: lifetime income (Social Security, pensions, and annuity income), earnings (wages and salaries for those who have not fully retired), and capital income (which includes income from businesses, rental property, dividends and interest, and trust funds or royalties). Savings were broken into qualified (defined contribution balances, IRAs, etc.) and non-qualified monies held in taxable accounts. 'Our analysis found much higher spending rates from lifetime income sources than from wages or capital income,' the study noted. 'Roughly 80% of lifetime income is spent, while less than half of wage income and capital income are spent. In addition, 65-year-old couples were found to be spending just 2% of their savings, which is roughly half of the commonly cited '4% rule' and even lower than most recent estimates, suggesting 5% is a more reasonable starting place.' 'Unless people purposefully want to leave behind a large bequest when they die, many retirees are denying themselves the opportunity to enjoy life by spending more of their savings,' said Blanchett, Head of Retirement Research at PGIM DC Solutions. 'I don't think people purposefully want to horde their savings; they are just finding it difficult to view savings as a potential form of retirement income,' added Finke, Professor and Frank M. Engle Chair of Economic Security Research at the American College of Financial Services. 'They are able to make that adjustment when they receive annuity and RMD payments, so there is a path to getting over this behavioral barrier.' RII's Previous Research into Spending in Retirement In a June 2024 study, Guaranteed Income: A License to Spend, Blanchett and Finke, determined that retirees with assets that annuitize income spend twice as much as retirees with an equal amount of non-annuitized savings. Blanchett and Finke find that every $1 of assets converted to guaranteed income could result in roughly twice the equivalent spending compared to money left invested in a portfolio. This effect suggests that the explanation for under-spending of non-annuitized savings among retirees is likely both a behavioral and a rational response to longevity risk. Their analysis corresponds with findings in the Alliance's 2024 Protected Retirement Income and Planning (PRIP) Study, in which 46% of the 2,516 consumers aged 45 to 75 surveyed acknowledged that spending their savings gives them anxiety. About The Alliance for Lifetime Income The Alliance for Lifetime Income (ALI) is a non-profit (c)(6) consumer education organization based in Washington, D.C., that creates awareness and educates Americans about the value and importance of having protected income in retirement. The Alliance provides consumers and financial professionals with unique educational resources and interactive tools to use in building retirement income strategies and plans. We believe annuities – one of only three sources of protected lifetime income – can be an important part of the solution for retirement security in America. The Alliance's Retirement Income Institute houses the leading retirement scholars and experts who create evidence-based research and analysis, with practical ideas and actions to help protect retirees.
Yahoo
28-01-2025
- Business
- Yahoo
Why retirement portfolio strategies get more complicated over time
Listen and subscribe to Decoding Retirement on Apple Podcasts, Spotify, or wherever you find your favorite podcasts. How might you go about building an efficient portfolio to save for retirement? Well, if you're young and trying to accumulate a sum of money to support your lifestyle in retirement, the answer is somewhat simple, according to David Blanchett, the head of retirement research at PGIM DC Solutions. 'I don't want to say it's pretty easy, but you want to maximize return for some given unit of risk,' Blanchett said in a new episode of the Decoding Retirement podcast (see video above or listen below). 'So that's pretty straightforward.' Instead of worrying about such things as asset allocation (what percent of your portfolio to invest in stocks, bonds, and cash, for instance) and asset location (what assets to put in which accounts), if you're young, just invest your money in a target-date fund, he said. 'I'm a huge fan of target-date funds,' Blanchett said. 'It's a way to simplify the decision. … So this notion of asset allocation and thinking about how to allocate across account types, that's important. But it's not a big issue for most Americans.' Read more: Retirement planning: A step-by-step guide As you approach retirement, however, relying on a target-date fund becomes less critical, and finding a professional to guide your investment strategy becomes increasingly important, Blanchett said. You'll want 'something more personalized,' he said. 'That's where we can see a wide diversity of recommendations around risk.' If you're in retirement, however, building an efficient portfolio becomes, in Blanchett's words, 'a lot more interesting.' That's because you have to worry about many risks, including inflation, sequence of returns risk, and longevity, or the risk of outliving your money. Plus, if you're retired, you want to generate income from your portfolio. 'And that's where things get tricky,' Blanchett said. According to Blanchett, the best way to solve the trickiness of building an efficient portfolio when you're retired is with diversification. And the optimal portfolio for one retiree is likely to be very different for another retiree. 'The optimal portfolios you might want in retirement can just look very different for each person based upon what they're trying to accomplish,' he said. Overall, Blanchett doesn't think retirees should invest 100% of their money in stocks — even though, on paper, it produces the greatest returns — unless they meet very certain criteria, such as being very risk tolerant or having "tons of lifetime." He also addressed the notion that investors mistakenly view bonds as a reliable diversification asset. According to Blanchett, there's the concept of randomness in returns, and the key takeaway is understanding how the risk of holding stocks and bonds evolves over time. Read more: How much money should I have saved by 50? Historically, stocks fluctuate — they go up and down. However, over longer time horizons, equities tend to become less risky relative to bonds, whose risk generally increases, Blanchett said. It's important to note that the risk of all assets rises over time, but at different rates, he added. And what many studies and experts, Blanchett included, have pointed out is that stocks, in the long run, become more appealing. Even individuals who are risk-averse and uncomfortable with market volatility may find that leaving their portfolio untouched often yields better results with a more aggressive allocation to equities rather than bonds, he said. At the same time, another key objective for retirees is to increase their after-tax rate of return as they save for and live in retirement. For some, this could mean allocating bonds (which tend to be tax-inefficient) to pre-tax accounts and stocks (which tend to be tax-efficient) to taxable and Roth accounts as a strategy to enhance their long-term rate of return. If you have a traditional IRA, a Roth IRA, and a taxable account, and all of them are invested in the exact same way, you are missing an opportunity to optimize your after-tax returns. 'There's extremes you could take it to,' Blanchett said. But you should focus first on determining the appropriate level of risk for your assets, and then consider how to integrate tax strategies to further enhance the after-tax rate of return. Blanchett also addressed the hardest aspect of retirement planning: knowing how long you might live and, therefore, knowing how long you will need your money to last. 'The problem is that uncertainty of how long you're going to live,' he said. 'It just radically complicates what we're supposed to do and how much you're supposed to save.' According to Blanchett, the shift toward defined contribution plans hasn't been entirely beneficial for Americans. That's because when people reach retirement, it's difficult to create a plan that accounts for various idiosyncratic risks, such as longevity. 'It's a huge issue,' he said. Blanchett said one of the best strategies to address the longevity issue is to delay claiming Social Security or purchase a lifetime income annuity. This matters especially for individuals in the top income brackets who tend to live three to five years longer than the average American. If you don't accurately assess your longevity, if you don't 'personalize your plan,' there's a real risk that you're not 'preparing for the appropriate potential length of retirement,' Blanchett said. Many financial advisers today commonly recommend planning for a lifespan of up to age 95 to ensure clients can maintain their desired standard of living throughout retirement. Blanchett said planning to age 95 is a good starting place. But for some couples aged 65, there's a 50% chance that one will live longer than age 95. And given that, Blanchett said it's important that you use a free online tool, such as the Longevity Illustrator or Social Security life expectancy calculator, to get a better sense of how long you might live based on your situation. Each Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future on Decoding Retirement. You can find more episodes on our video hub or watch on your preferred streaming service. Sign in to access your portfolio
Yahoo
28-01-2025
- Business
- Yahoo
Retirement: Why it's hard to determine how long to plan for
What's the best way to maximize after-tax returns and build the optimal portfolio? How should American households measure their longevity risks? Robert "Bob" Powell sits down with David Blanchett, Head of Retirement Research at PGIM DC Solutions, and Doug Boneparth, Bone fide Wealth President & Founder, to discuss several different topics including how to understand risk over time, plan for your longevity risk, and prioritize different savings goals. Doug & David both agree that open financial communication is the most important strategy when it comes to your household's financial planning. Find out how to calculate the best investment strategy for you and your family in this week's episode of Decoding Retirement. Understanding risk over time (6:00) Why stocks become relatively less risky over longer time horizons. "How does the risk of holding those investments change the longer I hold them?" - David Blanchett Planning for the worst (14:20) Why there is not one way to go about your financial life. "What good is investing your money if you can't stay invested to enjoy compounding your returns?" - Doug Boneparth Financial equality in the household (20:00) Why communication is fundamental when it comes to household financial planning. "It would be completely unacceptable for her not to know where the accounts are and how to access them...." - Doug Boneparth Video highlights: :40 - How to build an efficient portfolio 3:40 - The simplicity of target date funds 7:20 - Finding the best investment strategy for you 8:30 - Decoding longevity risk 11:40 - The impact of interest rates 14:20 - Why personal finance is personal 18:00 - How discuss finances with your partner Retirement planning doesn't mean locking up your money for a rainy day and forgetting about it. Planning your future means reacting to events today. Decoding Retirement gives you the tools to navigate the years ahead, and take action now! Yahoo Finance's Decoding Retirement is hosted by Robert Powell, and produced by Austin Rivera. Find more episodes of Decoding Retirement at Thoughts? Questions? Fan mail? Email us at yfpodcasts@ Editor's note: This post was written by Austin Rivera. Sign in to access your portfolio
