Study sheds light on a changing retirement landscape

As the youngest baby boomers begin to reach the age of 65, new research from the Alliance for Lifetime Income (ALI) sheds light on the changing retirement landscape. The study, part of the 2024 Protected Retirement Income and Planning (PRIP) annual report, reveals significant insights into the financial behaviors and attitudes of Americans aged 61 to 65, also known as Peak 65 consumers.

The PRIP study indicates that half of Americans in this age group have already retired and begun claiming Social Security benefits. Alarmingly, 28% of these individuals are still providing financial support to their adult children and extended family, highlighting the financial pressures they continue to face.

Disparity in retirement savings

The report uncovers a stark disparity in retirement savings among Peak 65 consumers. Over half (51%) possess investable household assets of less than $100,000. Meanwhile, 25% have between $100,000 and $500,000, 13% hold between $500,000 and $1 million, and only 11% have more than $1 million in assets.

The emotional response to their financial situation is equally divided. About 34% express worry, 33% feel confident, 39% are uncertain, and 42% are optimistic about their financial future.

Early retirement trends

The data shows that 51% of Peak 65 consumers have retired, with the average retirement age being 57.7. Those still working plan to retire at an average age of 67.1. Health issues and job dissatisfaction are primary reasons for early retirement, affecting 25% of retirees, while another 22% were either forced or incentivized to retire early.
Nearly half (49%) of Peak 65 consumers have started claiming Social Security benefits. Of these, 66% have investable assets of less than $100,000. The reasons for early claims include disability or inability to work (43%), the immediate need for income (40%), and concerns about the future availability of Social Security (30%).

Supporting extended family

The study highlights the growing financial burdens on the 'sandwich' generation, with 38% of Peak 65 consumers having living parents or in-laws. Additionally, 28% are providing financial support to adult relatives, which impacts their retirement savings and income for 18% of them.
The survey reveals a pessimistic outlook among Peak 65 consumers regarding their financial longevity. Nearly half (48%) do not believe their retirement savings will last through their lifetime, and 31% worry that their retirement income will not cover essential monthly expenses.

Jean Statler, CEO of the Alliance for Lifetime Income, emphasizes the importance of annuities in securing a stable retirement. "While it’s a difficult financial picture for more than half of Peak 65 consumers, there is still an opportunity for millions more to be financially secure in retirement if they protect themselves with an annuity," she stated. Statler highlighted that the median income for annuity owners in 2022 was about $76,000, underscoring their role in providing financial certainty.

The findings from the 2024 PRIP study align with a definitive report by the Alliance’s Retirement Income Institute, which indicates that two-thirds of Baby Boomers turning 65 between 2024 and 2030 are not financially prepared for retirement. This comprehensive research underscores the urgent need for financial advisors to educate clients about the benefits of annuities and other strategies to ensure a secure and comfortable retirement.

The online survey, conducted by Artemis Strategy Group, polled 2,516 consumers aged 45 to 75, including an oversample of 505 Peak 65 consumers aged 61 to 65. Data was weighted to reflect population demographics, including age, income, race/ethnicity, region, work and retirement status, assets, and education.

For financial advisors, these insights provide a critical understanding of the challenges and opportunities faced by their clients in the Peak 65 demographic, emphasizing the need for proactive retirement planning and secure income solutions.