Survey Says: Retiree Income Market Hurting from Low Interest Rates

Published on October 11, 2012

self directed retirement plansHearts & Wallets’ annual report of U.S. household finances says, “because of low interest rates, many American retirees are either reducing withdrawals from investments or are taking out way too much.”

The survey shows that retirees are withdrawing less from personal assets or are taking out so much that they are eating into capital. Many retirees have reduced portfolio withdrawals from 4 percent to 3 percent, while others are taking unsustainable 9 percent withdrawals.

It seems that retirees are at two ends of the spectrum and having a difficult time finding a happy medium between spending and saving.

Hearts & Wallets co-founder Chris Brown added “low interest rates may be the biggest reason more retiree households are not crossing the 4 percent withdrawal threshold and instead are cutting back on spending and making do with less.”

“Middle and lower-middle wealth groups are impacted most by depressed interest rates. These are less affluent retiree households that generate essentially little to no annual revenue and need to draw more heavily upon their personal assets to live,” Hearts & Wallets says.

As a result of reduced withdrawals, Hearts & Wallets downwardly revised its estimate of the overall retirement income market in 2020 to be between 14 to 24 percent of all U.S. household investable assets compared with its 20 to 30 percent projection it offered last year.

The findings are part of Hearts & Wallets’ “Portrait of U.S. Household Wealth: Market Sizing, Segmentation and Product Ownership by Age, Assets, Lifestage and Behavioral Segment” analysis that taps into data from more than 5,400 U.S. households and ongoing qualitative research.

To read the article in its entirety and more on the survey findings, click here.

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