50% of retirees don’t have any strategies to generate income in retirement: “I just take money when I need it.”
According to the Schroders 2021 US Retirement Survey, just 10% of non-retired Americans ages 45 and older are planning to wait until age 70 – the age at which an individual reaches their maximum monthly benefit – to begin taking their Social Security benefits.
Almost one-third (30%) plan to begin taking Social Security between the ages of 62-65 (before reaching full benefit age), 14% plan to file between ages 66-69, and 46% are unsure when they will claim Social Security.
This trend includes non-retired respondents near or at retirement age: among those ages 60-67, just 13% said they planned to wait to age 70 to take Social Security benefits, and 28% were still unsure.
In addition, only 5% of retirees surveyed said they waited until they were 70 years old to take their Social Security benefits.
Deciding Not to Wait
Seven-in-ten non-retired respondents said they wish they were more knowledgeable about Social Security. And yet, the decision to pass up larger monthly payments appears to be a deliberate one, as 74% of non-retired respondents – and 84% non-retired between 60-67 - understand the longer they wait to take Social Security the more they will receive.
“Social Security is the primary source of income for the majority of Americans we surveyed, which is why we were surprised to see so many deciding not to wait until seventy for larger monthly payments; or worse, sacrificing their full benefits by tapping into them early,” said Joel Schiffman, Head of Intermediary Distribution, North America, Schroders. “It might come down to being able to afford to wait. And that’s a function of how much they have saved in order to generate sufficient income in retirement. Waiting a few extra years before claiming your benefits can provide a much-needed cushion for future expenses.”
He added: “It’s understandable that younger workers might be unsure about when they will take their Social Security benefits. But for people near or at retirement age to still be unsure, that suggests a lack of planning. By that age, investors should have a strategy in place to generate retirement income. Hopefully those who are still unsure will try to make it to seventy to enjoy the larger benefit, or at least get to the age of full benefits.”
For 52% of non-retired Americans and 58% of retirees, Social Security will be, or is, their primary source of income in retirement – but it won’t be enough to live on, according to 64% of those not retired and 62% of retirees. Respondents have additional sources of income, including:
Unfortunately, 74% expressed concerns that they don’t know how to best generate income and/or draw down their assets in retirement.
How are retirees generating income?
According to retirees surveyed, 50% don’t have any strategies to generate income in retirement; instead, they said: “I just take money when I need it.”
Other income-producing strategies mentioned include:
Four-in-ten retirees also said they wish they had taken a more aggressive approach to investing in retirement.
“Generating income in retirement is more challenging than ever thanks to the prevailing low interest rate environment,” said Mr. Schiffman. “Social Security is one piece of the puzzle, but it’s not a panacea. With many of us spending 30 or more years in retirement, generating sustainable income beyond what’s provided by Social Security is vital to creating a comfortable lifestyle.”
About the Survey
The Schroders U.S. Retirement survey was conducted by 8 Acre Perspective nationwide among 1,000 U.S. consumers ages 45 –75 from January 20— 27, 2021. Respondents were fairly evenly split by age and gender; age: 45-59 (367), 60-69 (348), and 70+ (285); male (501), female (499). The survey included 230 working respondents with employer-provided defined contribution retirement plans.
For further information, please contact:
Jennifer Manser O’Rourke, Head of Corporate Communications, North America
Joe Collins, River Communications
Note to Editors
As a global investment manager, we actively and responsibly manage investments for a wide range of institutions and individuals, to help them meet their financial goals and prepare for the future. The world is forever changing, and with our clients at the center of everything we do, we understand the need to continue to adapt and evolve our business in line with what matters most to our clients today, and in the future.
Our ongoing success is built on a history of experience and expertise, whereby we partner with our clients to construct innovative products and solutions across our five business areas consisting of Private Assets & Alternatives, Solutions, Mutual Funds, Institutional and Wealth Management, and invest in a wide range of assets and geographies. By combining our commitment to active management and focusing on sustainability, our strategic capabilities are designed to deliver positive outcomes for our clients.
We are responsible for $785.1 billion* assets of our clients, managed locally by 42 investment teams worldwide. As a global business with over 5,500 talented staff across 35 locations, we are able to stay close to our clients and understand their needs. We have over 200 years of experience in investment and innovation and remain committed to creating a better future by investing responsibly for our clients.
Further information about Schroders can be found at www.schroders.com/us.
All investments involve risk, including the loss of principal. Diversification cannot ensure profits or abate all risk. The views and opinions stated are those of the individuals quoted and are subject to change. This document does not purport to provide investment advice and the information contained is for informational purposes and not to engage in any trading activities. The material is not intended to provide, and should not be relied on for accounting, legal or tax advice, or investment recommendations. Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser providing asset management products and services to clients in the US and Canada. Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and markets certain investment vehicles for which SIMNA Inc. is an investment adviser. SIMNA Inc. and SFA are indirect wholly-owned subsidiaries of Schroders plc, a UK public company with shares listed on the London Stock Exchange. Further information about Schroders can be found at www.schroders.com/us or by calling (212) 641-3800.
*as of December 31, 2020
The views and opinions contained herein are those of Schroders' investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.'s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.