Retirees Face Challenge Turning Savings Into Long-Term Income

{ "articleTitle": "Retirees Face Challenge Turning Savings Into Long-Term Income", "articleDescription": "Experts at the Bermuda International Life and Annuity Conference highlighted the difficulty of converting accumulated savings into a reliable income stream that lasts for decades, noting that individuals now bear risks previously managed by institutions.", "articleBody": "

Shifting Responsibility to Individuals

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Converting accumulated savings into a reliable income stream that lasts for up to 30 years is a major issue for retirees, according to reports from the Bermuda International Life and Annuity Conference held this week. The event featured a panel discussion on geopolitics, demographics, and the global retirement gap.

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Most retirees now face decisions involving an accumulation of savings rather than a pension upon finishing work, Rob Jamieson, senior vice-president of Fidelity Investments and chairman of the Insured Retirement Institute, stated at the conference. Jamieson said that today’s retirees face problems previous generations did not.

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Jamieson explained that the “decumulation phase” involves managing risks including market volatility, longevity, inflation, and timing of withdrawals. These risks are now managed by individuals rather than institutions, he added.

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Longevity and Inflation Risks

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Jamieson stated that when an average couple hits 65, there is about a 25 percent chance one will live to age 95. This longevity risk requires the nest egg to generate income for 30 years, he said.

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Retirees must consider costs ten or 20 years from now rather than current prices, Jamieson added. The challenge lies in ensuring that savings do not outlast the individual’s need for funds.

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Industry Solutions and Consumer Behavior

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Kendra Isaacson, partner at Mindset in Washington, said people generally struggle to manage retirement savings efficiently. She noted that insurers “could actually save people from themselves” by providing structure.

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Isaacson described the retirement experience as either “feast or famine.” She cited a study showing that most people who receive a lump sum spend it within five years, Isaacson said. Many retirees are terrified to spend money, and insurance may help ensure a dignified and easier retirement, she added.

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Panelists agreed the insurance industry can provide solutions such as annuities to generate income streams throughout retirement.

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Capital and Security

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Quentin Marsh, senior vice-president of RGA’s Americas Institutional Markets, said the industry must build effective solutions that meet consumer expectations and are simple to understand. He noted that life reinsurers in Bermuda provide an extra layer of security by providing capital and financial backup to insurers selling annuities directly to retirees.

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Amy Kessler, president of TIAA’s Bermuda companies, said the re/insurance ecosystem has been successful in sourcing capital for the retirement income system. She stated that 20 years ago,