IRI: Protected Lifetime Income Streams Should Be Incorporated into Retirement Income Plans
WASHINGTON, D.C. – The largest boost to Social Security benefits since 1982 announced today will offset some inflationary pressure for retirees. According to the Insured Retirement Institute (IRI), this news is a reminder to workers and retirees to incorporate additional sources of protected lifetime income into retirement plans.
This week, the U.S. Social Security Administration (SSA) announced a 5.9 percent cost-of-living benefit boost for 2022 due to higher inflation. SSA issues a cost-of-living benefit adjustment every year.
“A cost-of-living increase for Social Security benefits is always helpful but only keeps the value of those benefits steady over time,” said Frank O’Connor, IRI Vice President, Research and Outreach. “While COLAs can help retirees keep up with basic expenses, the faster rate of health care cost inflation will continue to eat into retirees’ financial resources. Careful retirement planning that includes additional protected lifetime income is vital to ensure retirees can manage these costs.”
The average annual Social Security benefit for a married couple is $30,384, according to SSA. IRI’s 2019 Boomer Expectations for Retirement report found that the average spent by retirees aged 65-74 is $55,000. Yet, only 30 percent of baby boomers believe they will need $55,000 or more in annual retirement income.
Meanwhile, IRI’s 2021 Retirement Readiness Among Older Workers study found 62 percent of older workers believe they can downsize and get by on Social Security if they exhaust their savings during retirement.
“Workers have mismatched expectations when it comes to retirement income and lifestyle,” O’Connor said. “They largely expect they will not only have adequate income for basic expenses during retirement but will also have discretionary income for travel and leisure activities. They also may be unrealistic in their contingency plans if they exhaust their savings; for example, nearly 40 percent say they will ‘return to work’ if they run out of money, but few retirees actually do so.”
O’Connor added that annuities could help bridge this gap by providing more income per dollar invested than alternatives and guaranteeing that income for life.
“The bottom line is that workers and retirees should go beyond today’s Social Security benefit hike headline and talk to a financial adviser about savings and income strategies that will ensure a financially secure retirement,” O’Connor said.
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Contact: Dan Zielinski
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