Vanguard: Retirement Income Among Wealther Retirees

[SumDay]

Mods, if this has been posted, I apologize. If so, please merge. I did search but didn't see it - it was released May 28th.

If not, enjoy:

https://institutional.vanguard.com/V...ncAmongWealthy
You can download the 16 page PDF from there.

I'm thrilled to find out that Vanguard considers me "wealthy". It's all relative, I guess.

[Chuckanut]

I thought this quote was very interesting:

Quote:

First, although the incidence of private-sector pension plans has been declining for several decades, pension income still remains important to a substantial number of wealthier households, an important market for new retirement income services. This high level of guaranteed income may explain the puzzle regarding the low current rate of withdrawals from tax-deferred retirement accounts, and the weak demand for services creating systematic income streams from financial accounts. As corporate pensions continue to decline in importance, we expect that the demand for retirement income help, whether in the form of income products or of advisory services, will rise. But it is likely to do so only gradually. Second, there is a substantial degree of variety in the income sources and financial accounts owned by wealthier households. This variety suggests the need for nuanced and targeted advice and guidance customized to the household’s retirement income holdings. Households are clearly different, even at a high level, in terms of risk characteristics, the nature of income guarantees they own, tax status of accounts, liquidity preferences, and the desire for help from an advisor. Our findings also highlight the importance of Social Security-claiming strategies for wealthier retirees. These households have meaningful private resources that they can rely on independent of Social Security, and so are likely the most able to benefit from deferring receipt of Social Security to a later age.

[W2R]

The article defines wealthy retirees as "those ages 60–79 with at least $100,000 in financial assets, whether in taxable, tax-deferred, or other types of accounts." Wahoo! I guess that makes many of us wealthy.

Median income was $69,500.

It goes into median/mean income sources, and does a cluster analysis based on income sources. Then demographic characteristics. Pretty interesting article, I agree. Thanks!

[SumDay]

I also thought this was interesting:

Quote:

Annuity Investors were more likely to have someone in their household in poor health compared with the average. In addition, they were also less likely to have a college education or want to leave a bequest. Given their lower-than-average income, they were more likely to adhere to a strict budget and have developed a spending plan prior to retiring. Annuity Investors were more likely to have a professional financial advisor.

[Walt34]

Quote:

Originally Posted by W2R The article defines wealthy retirees as "those ages 60–79 with at least $100,000 in financial assets, whether in taxable, tax-deferred, or other types of accounts."

I've been called lots of things but "wealthy" was never one of them. But as has been discussed here before it's a relative term.

[bolt]

"Annuity Investors were more likely to have a professional financial advisor". FA's receive huge commissions selling annuities. People with FAs are less likely to know annuities ins and outs.

[mickeyd]

Quote:

Originally Posted by Walt34 I've been called lots of things but "wealthy" was never one of them. But as has been discussed here before it's a relative term.

$100K seems like a small amount to gain wealthy status. Evidently there are no rules on the use of this word.

[Another Reader]

The $100k in financial assets is ridiculous, but did you see how they valued pensions, social security and real estate income in the foot note at the bottom of page 3? They discounted pension and social security income at 3 percent over the life expectancy of the person and they capitalized real estate income at 5 percent. By their calculations, the 62 year old librarian with $100k in CD's, a small pension check and social security is wealthy. I'm also awfully glad they were able to solve the age-old argument about how to value pensions and social security and that they know the cap rate for my rentals.

The authors also state that these wealthier investors with private assets find it easier to defer Social Security, but 85 percent of the households surveyed have at least one person on Social Security. Maybe the writers should look at the data before they write their conclusions.

These folks are trying to figure out why there is not a rush to create retirement income is the post pension world. What they found was a population mostly dependent on pensions and social security. These people aren't going to call a financial services provider and ask how to convert their meager savings into income. Nope, this population will be tightly clutching their CD's and account statements until they are pried out of their fingers.

[Lsbcal]

I am deeply insulted now.

[pb4uski]

When I click on read PDF it just boots me to the Vanguard institutional investor home page. I can't seem to access the report.

[Gumby]

Quote:

Originally Posted by pb4uski When I click on read PDF it just boots me to the Vanguard institutional investor home page. I can't seem to access the report.

Try this link (it's a pdf, so it takes some time to load)

https://institutional.vanguard.com/i...rceDomain=true

[pb4uski]

Much better. Thanks.

[mickeyd]

I remember when years ago DW realized that we had over $1M in assets and loved to remind me that we were millionaires. She was mostly proud that she had married so well, I think. I often wonder how many other folks are self-impressed that they are "wealthy", "well healed", "comfortable" but really don't know what they have in their investment accounts. I'll bet it's a high number. I also bet that few of them read this forum.

[redduck]

Quote:

Originally Posted by mickeyd ... I often wonder how many other folks are self-impressed that they are "wealthy", "well healed", "comfortable" but really don't know what they have in their investment accounts. I'll bet it's a high number. I also bet that few of them read this forum.

Darn, mickeyd, was that really necessary? Talk about a buzz kill.

[robnplunder]

Quote:

Originally Posted by Another Reader By their calculations, the 62 year old librarian with $100k in CD's, a small pension check and social security is wealthy.

I'm in trouble. I am not a librarian. Heck, I stopped going to library years ago. The only CDs I have are the plastic kinds and they amount to very little money if I sell them on E-bay. I've got no pension and have 17 more years to go for SS payments at age 70. The only thing going for me is my life expectancy of 78. I just need to last 8 years after my first SS check. Right now, I feel very poor.

[Koolau]

Agree that this is an interesting article. Also surprised by the (relatively small) level of wealth they use to define "wealthy". My gut tells me it's the first cut to help them define when it is worth going after such folks to sell them things. But, of course, I could be cynical so YMMV.

[TuborgP]

Lot of truth in the article. Our pensions form a very nice retirement income. Having done the 62/70 SS strategy and now collecting spousal at 66 and my full age 70 benefit (close to max) our investment income is being added to and not drawn down. Many pension recipients also went down the 401/403 route and have three solid legs on their retirement stool. Especially those coming out of high income areas. Would love to see research comparing investment wealth of pensioners vs non pensioners could be surprising.

[Another Reader]

I have an inherited IRA from which RMD's must be taken. They are not insignificant at my age. Did I look for someone to convert this to an income stream? Heck, no. I set aside enough cash to cover my expected withdrawals for three years and kept the remainder in investments.

People that have decent accumulations in retirement accounts generally have some knowledge of how to take the money out. If they have pensions and social security on top of the asset accounts, they are generally not all that worried. It's the people with little or no pension income, lower levels of social security income, and limited accumulations of paper assets that are candidates for annuitization. And yet most of them won't do that. The lack of a market for these products is not difficult to understand.

[Mulligan]

Quote:

Originally Posted by Another Reader The $100k in financial assets is ridiculous, but did you see how they valued pensions, social security and real estate income in the foot note at the bottom of page 3? They discounted pension and social security income at 3 percent over the life expectancy of the person and they capitalized real estate income at 5 percent. By their calculations, the 62 year old librarian with $100k in CD's, a small pension check and social security is wealthy. I'm also awfully glad they were able to solve the age-old argument about how to value pensions and social security and that they know the cap rate for my rentals. The authors also state that these wealthier investors with private assets find it easier to defer Social Security, but 85 percent of the households surveyed have at least one person on Social Security. Maybe the writers should look at the data before they write their conclusions. These folks are trying to figure out why there is not a rush to create retirement income is the post pension world. What they found was a population mostly dependent on pensions and social security. These people aren't going to call a financial services provider and ask how to convert their meager savings into income. Nope, this population will be tightly clutching their CD's and account statements until they are pried out of their fingers.

Well, you sure smoked me out of the forest. Mostly guilty as charged. Net worth small here compared to many here, but "income rich" through a pension. And yes, I put $2 into CDs/IBonds for every $1 into the market. I will not have my account statements pried from my hands but am thinking about doing something drastic and rolling them over into 10 year brokerage CDs.


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[rothlev]

a summary of the report is here:

No one-size-fits-all retirement solution - Robert Powell's Retirement Portfolio - MarketWatch