Fact Book on Retirement Income A Review of the Trends and Activity in the Retirement Income Market

Transcription

1 Fact Book on Retirement Income 2010 A Review of the Trends and Activity in the Retirement Income Market

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3 Fact Book on Retirement Income 2010 A Review of the Trends and Activity in the Retirement Income Market LIMRA Retirement Research Project Team Dan Beatrice Senior Analyst Retirement Research dbeatrice@limra.com Matt Drinkwater, Ph.D., FLMI, AFSI, PCS Associate Managing Director Retirement Research mdrinkwater@limra.com Jafor Iqbal Associate Managing Director Retirement Research jiqbal@limra.com LIMRA is a global association of insurance and investment companies. Over 850 financial services companies in more than 70 countries around the world turn to LIMRA first to help them build their businesses and improve their performance. These members rely on our 90 years of industry experience, along with resources in Research, Consulting, Assessment, Development, and Compliance and Regulatory Services. LIMRA s Retirement Research Center is a leading and trusted resource for information and solutions for the retirement industry. We use our industry expertise to help you capitalize on market trends accumulating, transitioning, and using retirement assets for income and legacy, as well as the management of new risks. Although information or data provided by independent sources is believed to be reliable, LIMRA is not responsible for its accuracy, completeness, or timeliness. Opinions expressed by independent sources are not necessarily those of LIMRA. If you have questions or comments about this material, please contact the source directly. 2010, LL Global, Inc. SM This publication is a benefit of LIMRA membership. No part may be shared with other organizations or reproduced in any form without LL Global s written permission ( R70) Printed in U.S.A.

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5 CONTENTS Section One: Review of U.S. Retirement Income Market Figure 1: Retirees by Age (2009)...13 Figure 2: Projected Number of Retirees in 2025 and Figure 3: Improving Life Expectancy at Age 65 and Age Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Figure 10: Retirees by Household Income Level...16 Retirement Income Sources by Household Income...18 Retirement Income by Sources...18 of Financial by Type...19 Retiree of Financial by Wealth...20 Pre-Retiree of Financial by Wealth...21 Retiree and Pre-Retiree Numbers and Financial by Wealth Segment...22 Data Tables Table 1: U.S. Retiree Populations...23 Table 2: U.S. Population Over Age 65 and Over Age 85 ( )...24 Table 3: Life Expectancy at Birth Table 4: Life Expectancy at Birth, Age 65, and Age 75 ( )...26 Table 5: U.S. in or Near Retirement by Age...27 Table 6: U.S. in or Near Retirement by Wealth Status...27 Table 7: Total Retirement Income by Source...28 Table 8: Retirement Income by Source and Age...28 Table 9: Retirement Income by Source and Age...29 Table 10: Retirement Income by Source and Household Income...30 Table 11: Retirement Income by Source and Household Income...30 Table 12: Number of Retiree by Age and Source...31 Table 13: Percentage of Retiree by Source and Age...31 Table 14: Number of Retiree by Income and Source...32 Table 15: Percentage of Retiree By Income and Source...32 Table 16: Household Income of Pre-Retirees (Aged 55 74)...33 Table 17: Household Income of Pre-Retiree by Income Level...33 Table 18: Number of Retired and Not Retired Individuals with Personal Income Over $50, Table 19: Number of Retired and Not Retired with Household Income Over $50, Table 20:, Debt, and Net Worth of by Retirement Status...35

6 Table 21: Table 22: Table 23: Table 24: Table 25: Table 26: Table 27: Table 28: Table 29: Table 30: Table 31: Table 32: Table 33: Table 34: Table 35: Table 36: Table 37: Table 38: Table 39: Table 40: Table 41: Table 42: Table 43: Table 44: Table 45: Table 46: Table 47: Table 48: Table 49: Table 50: Table 51: Fully Retired Financial by Age...36 Financial by Income Level...36 Income by Wealth Strata...37 Financial by Wealth Strata...37 Non-Financial by Wealth Strata...38 Debt by Wealth Strata...38 Net Worth by Wealth Strata...39 Total Financial by Age...39 Retirement/Pension Account by Age...40 Publicly Traded Stock by Age...40 Mutual Fund by Age...41 Cash and Cash-Equivalent by Age...41 Certificate of Deposit by Age...42 Deferred Annuity (Non-Qualified) by Age...42 Bond by Age...43 Cash Value Life Insurance by Age...43 Other Financial of Fully Retired by Age...44 Total Financial by Wealth Strata...44 Retirement/Pension Account by Wealth Strata...45 Publicly Traded Stock by Wealth Strata...45 Mutual Fund by Wealth Strata...46 Cash and Cash Equivalent by Wealth Strata...46 Certificate of Deposit by Wealth Strata...47 Deferred Annuity (Non-Qualified) by Wealth Strata...47 Bond by Wealth Strata...48 Cash Value Life Insurance by Wealth Strata...48 Other Financial by Wealth Strata...49 Types of Non-Financial by Age...49 Types of Non-Financial by Wealth Strata...50 of Primary Residence by Age...50 of Primary Residence by Wealth Strata...51

7 Table 52: Table 53: Table 54: Table 55: Table 56: Table 57: Table 58: Table 59: Table 60: Table 61: Table 62: Table 63: Table 64: Table 65: Table 66: Table 67: Table 68: Table 69: Table 70: Table 71: Table 72: Table 73: Table 74: Table 75: Table 76: Table 77: Table 78: Table 79: Table 80: Partially Retired Total Household by Age...52 Financial by Age...52 Retirement/Pension Account by Age...53 Publicly Traded Stock by Age...53 Mutual Fund by Age...54 Cash and Cash-Equivalent by Age...54 Certificate of Deposit by Age...55 Deferred Annuity (Non-Qualified) by Age...55 Bond by Age...56 Cash-Value Life Insurance by Age...56 Other Financial by Age...57 Financial by Wealth Strata...57 Types of Financial by Wealth Strata...58 Pension/Retirement Account by Wealth Strata...58 Publicly Traded Stock by Wealth Strata...59 Mutual Fund by Wealth Strata...59 Cash And Cash-Equivalent by Wealth Strata...60 Certificate of Deposit by Wealth Strata...60 Deferred Annuity (Non-Qualified) by Wealth Strata...61 Bond by Wealth Strata...61 Cash-Value Life Insurance by Wealth Strata...62 Other Financial by Wealth Strata...62 Pre-Retiree Total Financial by Age...63 Types of Financial by Age...63 Pension/Retirement Account by Age...64 Publicly Traded Stock by Age...64 Mutual Fund by Age...65 Cash and Cash-Equivalent by Age...65 Certificate of Deposit by Age...66

8 Table 81: Table 82: Table 83: Table 84: Table 85: Table 86: Table 87: Table 88: Table 89: Table 90: Table 91: Table 92: Table 93: Table 94: Table 95: Deferred Annuity (Non-Qualified) by Age...66 Bond by Age...67 Cash-Value Life Insurance by Age...67 Other Financial by Age...68 Total Financial by Wealth Strata...68 Types of Financial by Wealth Strata...69 Pension/Retirement Account by Wealth Strata...69 Publicly Traded Stock by Wealth Strata...70 Mutual Fund by Wealth Strata...70 Cash and Cash-Equivalent by Wealth Strata...71 Certificate of Deposit by Wealth Strata...71 Deferred Annuity (Non-Qualified) by Wealth Strata...72 Bond by Wealth Strata...72 Cash-Value Life Insurance by Wealth Strata...73 Other Financial of Pre-Retiree by Wealth Strata...73 Section Two: Review of Retirement Income Products Figure 11: Sales and Projected Sales of Immediate Annuities...77 Figure 12: Sales of Immediate Annuities by Distribution Channel...78 Figure 13: New Deferred VA Sales with an Income or Withdrawal Benefit...79 Figure 14: GLB Election Trends (Participant Survey)...80 Figure 15: LTCI Buyers in 2008 by Age...82 Figure 16: Reverse Mortgage Financing (Initial Principal Limit)...83 Figure 17: Retirement Income Product (Year-End 2009)...84 Figure 18: Retirement Income Product Sales (In 2009)...84 Data Tables Table 96: Annuitization of Deferred Annuity...86 Table 97: Variable Deferred Annuity by Market Type...86 Table 98: Fixed Deferred Annuity by Market Type...87 Table 99: Deferred Annuity by Product Type...87 Table 100: Year-End Deferred Annuity by Market Type and Product Type...88 Table 101: Top-20 Companies for Variable Deferred Annuity...89

9 Table 102: Top-20 Companies for Fixed-Rate Deferred Annuity...90 Table 103: Top-20 Companies for Indexed Deferred Annuity...91 Table 104: Top-20 Companies for Total Deferred Annuity...92 Table 105: Deferred Annuity Sales ( )...93 Table 106: Variable Annuity (VA) Deferred Sales ( )...93 Table 107: Fixed Deferred Annuity Sales ( )...94 Table 108: Annuity Sales Forecasts by Product Type ( )...94 Table 109: Individual Annuities Internal and External Replacements...94 Table 110: Immediate Annuity Sales ( )...95 Table 111: Top-10 Companies Fixed Immediate Annuity Sales in Table 112: Sales of Fixed Immediate Annuity by Distribution Channel...96 Table 113: Fixed Immediate Annuity Forecast ( )...96 Table 114: Variable Annuity GLB Sales and Election Rates by Quarter...97 Table 115: Election Rates, When Any GLB Available by GLB and Quarter...98 Table 116: Top-10 Companies for VA Sales with GLB in Table 117: GLB Utilization Partial Withdrawal Activity...99 Table 118: GLWB Owners/Buyers by Age (2008)...99 Table 119: GMWB Owners/Buyers by Age (2008) Table 120: GMIB Owners/Buyers by Age (2008) Table 121: in Managed Payout Funds Table 122: Reverse Mortgage Financing ( ) Table 123: Top-20 Companies in Reverse Mortgage Financing Table 124: Individual LTCI New and In-Force Business Table 125: Life/LTCI Combination Benefit Sales Table 126: 2008 Individual LTCI Buyers by Age Table 127: 2009 Sales And of Retirement Income Products...106

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11 SECTION ONE Review of the U.S. Retirement Market

12 This analysis looks at individuals and households in or near retirement. A household is considered fully retired if all of its earning members are retired. A partially retired household has one member retired and another member still working. Pre-retiree households have a head of household between ages 55 and 74, but no one in the household yet retired. For married couples, age group assignment is based on age of the oldest spouse. The sources for the U.S. retirement data are mainly from LIMRA analysis of two public sources: the 2007 Survey of Consumer Finances, Federal Reserve Board (2009), and the U.S. Census Bureau s Current Population Survey, March 2009 Supplement. In doing the analysis, LIMRA developed an algorithm to determine individual retirement status based on age and employment status. The Survey of Consumer Finances (SCF) is conducted every three years to provide detailed information on the finances of U.S. families. No other study for the country collects comparable information. Data from the SCF are widely used, from analysis at the Federal Reserve and other branches of government to scholarly work at the major economic research centers. LIMRA has done the SCF 2007 data analysis for household assets. The Current Population Survey (CPS) is a monthly survey of about 50,000 households conducted by the Bureau of the Census for the Bureau of Labor Statistics. They have conducted the survey for more than 50 years. The CPS is the primary source of information on the labor force characteristics of the U.S. population. CPS data have been used primarily for analysis of household and individual income information. Because the points of reference and periods of the two public sources are different, the numbers shown in tables may differ. The data for retirement income products in Section 2 are, for the most part, based on regular quarterly and annual surveys and analysis conducted by LIMRA. 12 Fact Book on Retirement Income 2010 LIMRA

13 U.S. Retirement Income Landscape Retirement and retirement security have become critical issues for individuals, financial institutions, employers, and the government and will continue to remain so for a long time. The U.S. retirement income landscape has changed over the years with contracting defined benefit pension plans, low savings rates, and management responsibilities and liabilities for retirement increasingly being thrust on individuals as well as employers. Various retirement risks, issues, and topics have surfaced in the last decade as baby boomers started to prepare for retirement amid two severe market downturns. As a result, retirement solutions are becoming the focus of strategies and marketing for almost all financial institutions. In short, the landscape of retirement is changing, and responses from provider and advisor communities will continue to shape issues, products, and market opportunities for the next few decades. The issue of how to generate a sustainable income stream in retirement years from retirement savings will remain central. The changing retirement income marketplace will be influenced by the major demographic or economic shifts described in the following paragraphs. As of March 2009, there were 41.3 million retirees in the United States, constituting 13.7 percent of the total U.S. population. Almost 75 percent of the U.S. population over age 59 were retired. These retirees included 23.4 million fully retired households (including 8.9 million married households where both spouses are retired) and 28.8 million households where at least one person is retired. FIGURE 1 Retirees by Age (2009) Millions Baby Boomers % Age 100% 75% 50% 25% Percent Retired Not Retired Retired Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. LIMRA Fact Book on Retirement Income

14 The percentages for U.S. retirees and pre-retirees at age 64 were almost evenly split half were still working and half were retired (Figure 1). However, at age 65, the number of people retiring leaps by almost 20 percentage points. As a result, at age 65, more than two thirds (68 percent) were retired and slightly more than 30 percent were still working. The majority of retirees are now in their early retirement phase. Nearly two thirds (63 percent) of retirees are now below age 75. Many of these retirees will make decisions critical to determining if and how they will manage financially in retirement. The opportunity to capitalize on the retirement income market potential is not limited to this or the next decade, as the infusion of new retirees will continue to grow (Figure 2). Retirees will constitute a substantially greater portion of the population in the next few decades, both in numbers and as a percentage of the total population. At the current rate, LIMRA estimates a million to one and a half million people will retire each year and the total number of retirees will grow to 65.6 million by 2025, from 41.3 million in The percentage of retirees to the total population will grow from 13.7 percent in 2009 to 19 percent in The number of retirees will grow to 80.6 million in 2040, almost double the number of retirees today. FIGURE 2 Projected Number of Retirees in 2025 and 2040 Millions million in million in million in Age or more Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. 14 Fact Book on Retirement Income 2010 LIMRA

15 However, the projected number of retirees and their well-being in retirement will be influenced by higher life expectancy and improved access to health care. In 2007, American men could expect to live 3.5 years longer and women 1.6 years longer than they did in The gap in life expectancy between males and females has narrowed, but it persists (Figure 3). With the gap narrowing in life expectancies among races, global life expectancy will improve further. According to the Centers for Disease Control and Prevention (CDC), the mortality from heart disease, stroke, and cancer has continued to decline in recent years, although mortality from chronic lower respiratory diseases and unintentional injuries has not. Life expectancy for individuals at age 65 and at age 75 has improved significantly. In the 25 years from 1980 through 2006, life expectancy among men at age 65 rose almost 3 years from 14.1 to 17 years and among women 1.4 years from 18.3 to 19.7 years. The life expectancy among men at age 75 improved to age 85.5 years and that of women to 87.3 years. Improved access to health care, advances in medicine, healthier lifestyles, and better health before age 65 are factors that underly longer life expectancies among older Americans. It is reasonable to argue that, with greater life expectancies, most retirees will need to plan for retirement to span three decades or more. FIGURE 3 Improving Life Expectancy at Age 65 and Age 75 Life expectancy Male at age 65 Female at age 65 Male at age 75 Female at age Source: Health in the United States, Centers for Disease Control and Prevention, LIMRA Fact Book on Retirement Income

16 An aging population and longer life expectancy come with an increase in chronic diseases and conditions associated with aging. Though aging is associated with increased functional limitations and conditions that affect quality of life, data indicate improved health and more active retirements for future retirees. According to the CDC, in 2007, 62 percent of adults 65 years of age and over had at least one basic activity difficulty or complex activity limitation. The percentage of adults 65 and over with fair or poor overall health status was 27 percent in 2007, down 2 percentage points for this group since 1991, ostensibly a slightly improved health situation for the aging population. With life expectancies rising, overall health improving, and retirement health care costs growing, retirees and pre-retirees must ensure that their savings will last longer and keep pace with inflation. They will need regular income from their savings, as well as the flexibility to tap their assets for unexpected expenses, such as out-of-pocket health care costs and long-term care expenses. In general, individuals with more personal income are likely to retire later (Figure 4). While almost one third of the population between ages 60 and 64 are retired, only 17.5 percent of individuals with annual income of $50,000 or more in the same age group are retired. However this may be influenced by the fact that before retirement individuals tend to have higher income (through salary/wages) than do those who have already retired, and after retirement many retirees incomes go down and may fall below $50,000. FIGURE 4 Retirees by Household Income Level retired population within each age group 100% 75% 50% 25% 0% Age retirees with income $50K or more retirees overall retirees with income <$50K Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. 16 Fact Book on Retirement Income 2010 LIMRA

17 Forty-four percent of retirees aged 65 to 69 have an income of $50,000 or more. While in general, 9 out of 10 individuals between ages 70 and 74 with income less than $50,000 are retired, 4 in 10 individuals in that age group are still working, with an annual income of more than $50,000. Out of a total of 77.8 million baby boomers, only 7 percent had retired as of Nearly one third of baby boomers (24.4 million) between ages 55 and 62 are very near to retirement. They will benefit from professional advice and guidance as they move toward retirement. In this first wave, 16 million boomers have household income of more than $50,000. Another 20.8 million baby boomers between ages 50 and 54 are approaching retirement. Fourteen million of these boomers have a household income of more than $50,000. These higher income households are not only the best prospects for accumulating retirement assets as they are at the peak of their earnings potential and have some time to make up but they are also the best candidates for advice since they often need to develop a comprehensive strategy to diversify their retirement income sources and cater to different financial goals. A few things stand out when we look at how all retirees receive their income (Figure 5). On average, a substantial part of retirement income (43 percent) comes from Social Security, with pensions and income from retirement accounts contributing another 25 percent. It appears that almost two thirds of total retirement income in general is guaranteed for life. Among these sources of income, Social Security becomes increasingly predominant as retirees age. For 65- to 69-year-olds, Social Security represents only 39 percent of their retirement income. For those retirees aged 80 and over, Social Security contributes almost 50 percent of their income. The fact that Social Security income rises with inflation may be one of the reasons why Social Security becomes so major for older retirees. LIMRA Fact Book on Retirement Income

18 FIGURE 5 Retirement Income Sources by Household Income 9% 11% 12% 4% 7% 8% 4% 7% 12% 8% 8% 25% 25% 23% 21% 43% 77% 50% 26% 20% All Retirees Under $25,000 $25,000 to $49,999 $50,000 or more Other Earnings Interest & Dividends Pensions/Retirement Social Security Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based upon fully retired households. However, a different picture emerges when we look at retirees with different income levels (Figures 5 & 6). As expected, lower-income retirees (household income less than $25,000) rely primarily on Social Security and are least likely to have other resources to supplement their retirement income. However, higher-income retirees have quite diverse income profiles and the predominance of any particular source of income disappears. As we can see, retirees with $50,000 or more annual income are most likely to rely on their own resources for a significant portion (54 percent) of their retirement income. FIGURE 6 Retirement Income by Sources retiree households 87% 91% 88% 86% 84% 85% 90% 39% 19% 22% 65% 58% 24% 29% 70% 75% 42% 33% 74% 50% 37% 71% 54% 42% 8% Under $25,000 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 or more Social Security Pensions/Retirement Interest & Dividends Earnings Other Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based upon fully retired households. 18 Fact Book on Retirement Income 2010 LIMRA

19 Higher-income retirees show some unique characteristics: First, unlike retirees in general, the income profile of higher-income retirees varies less by age. Second, income from assets such as interest and dividends increases with age. It is probable that IRS-required minimum distributions contribute to higher earnings from this source. Third, unlike retirees in general, higher-income retirees seem able to maintain income from earnings into their advanced ages. Although higher-income households have more and varied sources of income, they also need sound retirement income planning. Growth and sustainability of income from their own sources are essential for maintaining their standard of living throughout retirement. As groups, both retirees and pre-retirees own diverse financial assets through similar financial instruments, with these exceptions (Figure 7): While only 35 percent of retirees own a retirement account like an IRA, 403(b), or 401(k), or pension account, 62 percent of pre-retirees own retirement accounts. One third of retirees own certificates of deposit (CDs) while only 1 in 5 pre-retirees own CDs. Eleven percent of retirees own a non-qualified annuity, while only 5 percent of pre-retirees (aged 55 to 74) own one. FIGURE 7 of Financial by Type retiree households 95% 95% 62% 35% 32% 30% 32% 18% 20% 18% 14% 13% 13% 16% 11% 5% 11% 11% Cash/ Cash equiv. Retirement Account CDs CV life Insurance Stocks Mutual Fund assets Bonds Non-Qual. Annuities Others Retirees Pre-retirees Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, Analysis based on fully retired households, and pre-retiree households with no retirees and heads of household aged 55 to 74. LIMRA Fact Book on Retirement Income

20 Wealthier retirees and pre-retirees have more diverse portfolios of financial assets (Figures 8 and 9). Only 19 percent of low-net-worth retirees (assets <$100K) own a retirement or pension account, compared with 62 percent of affluent retirees (assets $100K to $999.9K), and 89 percent of highnet-worth retirees (assets $1 million or more). Wealthier retirees also own more stocks, mutual funds, bonds, cash-value life insurance, and other financial assets. However, CDs and non-qualified annuities are popular among middle market and affluent retirees. While 55 percent of middle market affluent retirees own CDs, only 34 percent of high-net-worth retirees own CDs. Wealthier retirees also own more non-qualified annuities (24 percent). FIGURE 8 100%100% 93% 89% Retiree of Financial by Wealth retiree households owning assets 19% 62% 33% 68% 54% 55% 34% 28% 21% 24% 24% 51% 45% 39% 23% 24% 20% 34% 7% 5% 4% 5% 4% Cash & Equivalents Retirement Account Stocks Mutual Funds CDs Non-Qualified Bonds Cash-Value Annuity Life Insurance Low-Net-Worth (Less than $100K) Middle Market & Affluents ($100K-$999K) High-net-worth & Millionaires ($1 million or more) Other Financial Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, Analysis based on fully retired households. 20 Fact Book on Retirement Income 2010 LIMRA

21 A similar pattern exists for pre-retiree ownership of assets by wealth status, except in the following cases: More pre-retirees own retirement accounts than do retirees, particularly in the low-net-worth and middle and affluent market segments. Fewer pre-retirees (ages 55 to 74) own a non-qualified annuity, even in the high-net-worth segment, compared with retirees (17 percent vs. 24 percent). The tax-deferred benefit became diluted when lower marginal and capital gains taxes were enacted as a result of the tax changes from 2001 to As a result, the ownership of a non-qualified annuity using taxable investments declined since the enactment of these tax law changes, particularly by younger, affluent investors. FIGURE 9 93% 100%100% 93% 96% Pre-Retiree of Financial by Wealth pre-retiree households owning assets Cash & Equivalents 38% Retirement Account 7% 33% 65% 5% 19% 55% 11% Stocks Mutual Funds CDs Non-Qualified Bonds Cash Value Annuity Life Insurance Low-Net-Worth (Less than $100K) 25% 41% 2% 17% 9% 8% 25% Middle Market & Affluents ($100K-$999K) High-net-worth & Millionaires ($1 million or more) 41% 26% 48% 39% 9%10% 27% Other Financial Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, Analysis based on pre-retiree households with no retirees and heads of household aged 55 to 74. LIMRA Fact Book on Retirement Income

22 Generally, the wealthier segments particularly the middle market and affluent are the best prospects for retirement income advice and planning (Figure 10). There are almost 7.6 million retirees and 7.8 million pre-retirees who have assets more than $100K prime targets for retirement income planning. Collectively, these segments own a total of $12.4 billion in assets. The financial firms and advisors who develop meaningful relationships with them now will be best positioned to capture and retain those assets. FIGURE 10 Retiree and Pre-Retiree Numbers and Financial by Wealth Segment $4, $4, $2, $2,102.7 $299.1 $ Number of retirees (in millions) Retiree assets (in billions) Number of pre-retirees (in millions) Pre-retiree assets (in billions) n High-net-worth ($1 million or more) 1.2 $4, $4,194.0 n Middle Market & Affluents ($100K-$999K) 6.4 $2, $2,102.7 n Low Net Worth (<$100K) 13.8 $ $250.7 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, Analysis based on fully retired households, and pre-retiree households with no retirees and heads of household aged 55 to Fact Book on Retirement Income 2010 LIMRA

23 Data Tables TABLE 1 U.S. Retiree Populations Age Not Retired Retirees Total Population % of Retirees <40 164,162, ,162, to 44 20,761, ,107 20,877, % 45 to 49 22,462, ,453 22,711, % 50 to 54 20,853, ,491 21,654, % 55 to 59 16,770,510 1,984,274 18,754, % 60 to 64 10,575,545 4,958,883 15,534, % 65 to 69 2,738,405 9,086,628 11,825, % 70 to 74 1,048,309 7,530,609 8,578, % 75 to ,877 6,858,567 7,329, % 80 to ,961 5,454,529 5,676, % ,930 4,274,917 4,377, % Total 260,168,367 41,314, ,482, % Individuals under age 40 classified as not retired. Source: LIMRA analysis of U. S. Census Bureau s Current Population Survey, March 2009 Supplement. LIMRA Fact Book on Retirement Income

24 TABLE 2 U.S. Population Over Age 65 and Over Age 85 ( ) Year Number of people aged 65 and over % of Age 65 and over to Total Population Number of people aged 85 and over % of Age 85 and over to Total Population Year Number of people aged 65 and over % of Age 65 and over to Total Population Number of people aged 85 and over % of Age 85 and over to Total Population ,106, % 4,295, % ,785, % 7,413, % ,345, % 4,399, % ,404, % 7,689, % ,596, % 4,511, % ,952, % 8,052, % ,925, % 4,641, % ,453, % 8,379, % ,294, % 4,783, % ,840, % 8,681, % ,717, % 4,946, % ,933, % 9,041, % ,186, % 5,120, % ,875, % 9,661, % ,812, % 5,295, % ,762, % 10,246, % ,624, % 5,443, % ,687, % 10,775, % ,387, % 5,599, % ,751, % 11,320, % ,121, % 5,753, % ,695, % 11,818, % ,991, % 5,880, % ,400, % 12,334, % ,399, % 5,997, % ,915, % 12,862, % ,798, % 6,106, % ,325, % 13,400, % ,143, % 6,195, % ,773, % 13,978, % ,570, % 6,292, % ,140, % 14,513, % ,959, % 6,367, % ,528, % 15,059, % ,428, % 6,419, % ,969, % 15,603, % ,966, % 6,462, % ,489, % 16,109, % ,570, % 6,501, % ,148, % 16,655, % ,297, % 6,590, % ,826, % 17,124, % ,985, % 6,674, % ,443, % 17,537, % ,731, % 6,765, % ,037, % 17,912, % ,509, % 6,893, % ,597, % 18,267, % ,246, % 7,039, % ,200, % 18,567, % ,077, % 7,213, % Source: U.S. Census Bureau s National Population Projections, Released 2009, Constant Net International Migration Series. 24 Fact Book on Retirement Income 2010 LIMRA

25 TABLE 3 Life Expectancy at Birth ( ) Year All Male Female Year All Male Female Source: Centers for Disease Control and Prevention, Life Expectancy Preliminary Data 2007, Released LIMRA Fact Book on Retirement Income

26 TABLE 4 Life Expectancy at Birth, Age 65, and Age 75 ( ) At Birth At Age 65 At Age 75 Year All Male Female All Male Female All Male Female Sources: CDC/NCHS, Health in the United States, Fact Book on Retirement Income 2010 LIMRA

27 TABLE 5 U.S. in or Near Retirement by Age Age of Head of Household Fully Retired Partially Retired Pre-Retiree <55 289, ,929 N/A 55 to , ,232 9,921, to 64 1,869,573 1,292,455 5,795, to 69 3,461,583 1,636,944 1,903, to 74 3,822,819 1,261, , ,459, ,884 N/A All Ages 21,412,662 6,100,552 18,200,330 N/A Not applicable Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, For married couples, age group assignment based on age of oldest spouse. Analysis based on fully retired households, partially retired households, and on households with no retirees and heads of household aged 55 to 74. TABLE 6 U.S. in or Near Retirement by Wealth Status Financial Asset Segments Fully Retired Partially Retired Pre-Retiree Low-net-worth: <$100K 13,815,666 3,450,057 10,339,237 Middle market: $100K-$249K 3,320, ,549 3,379,050 Mass affluent: $250K-$499K 1,925, ,489 1,858,854 Affluent: $500K-$999K 1,107, ,688 1,380,717 High-net-worth: $1.0 mil.-$3.49 mil. 924, , ,354 Mega-millionaire: $3.5 mil.+ 318, , ,118 Total 21,412,662 6,100,552 18,200,330 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, For married couples, age group assignment based on age of oldest spouse. Analysis based on fully retired households, partially retired households, and on pre-retiree households with no retirees and heads of household aged 55 to 74. LIMRA Fact Book on Retirement Income

28 TABLE 7 Total Retirement Income by Source Income Source Total Income ($ in millions) Percent Social Security $414, % Pension/Retirement $246, % Interest and Dividends $116, % Employment Earnings $110, % Other $88, % Total $975, % Note: Analysis based on individual s retirement status. Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement TABLE 8 Retirement Income by Source and Age Sources of Income ($ in millions) Age Social Security Pensions/ Retirement Interest & Dividends Earnings Other Total 40 to 54 $14,237 $21,140 $969 $24,960 $7,824 $29, to 59 $15,377 $27,000 $1,502 $25,000 $8,604 $40, to 64 $14,892 $23,808 $1,348 $20,000 $6,000 $34, to 69 $16,800 $16,200 $1,179 $18,000 $6,564 $30, to 74 $16,241 $12,108 $1,200 $15,000 $5,520 $27, to 79 $15,557 $10,968 $1,270 $15,000 $7,044 $25, $14,357 $10,800 $1,213 $20,000 $6,264 $21,741 All $15,556 $13,824 $1,218 $18,000 $6,564 $26,417 Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. Household income represents total income received in Fact Book on Retirement Income 2010 LIMRA

29 TABLE 9 Retirement Income by Source and Age Sources of Income ($ in millions) Age Social Security Pensions/ Retirement Interest & Dividends Earnings Other Total 40 to 54 $2,950.4 $4,131.2 $2,273.7 $4,018.5 $1,812.9 $15, % 27% 15% 27% 12% 100% 55 to 59 $3,658.6 $12,638.2 $4,026.5 $10,914.6 $4,944.4 $36, % 35% 11% 30% 14% 100% 60 to 64 $22,341.0 $31,412.9 $10,978.3 $25,313.3 $7,989.3 $98, % 32% 11% 26% 8% 100% 65 to 69 $78,124.8 $47,214.5 $22,180.2 $39,809.8 $14,813.3 $202, % 23% 11% 20% 7% 100% 70 to 74 $73,573.8 $36,842.9 $18,396.8 $23,407.4 $12,842.2 $165, % 22% 11% 14% 8% 100% 75 to 79 $72,137.6 $30,771.9 $20,823.1 $19,634.9 $14,829.0 $158, % 20% 13% 12% 9% 100% 80+ $102,926.9 $38,635.2 $23,303.2 $27,453.3 $20,725.5 $213, % 18% 11% 13% 10% 100% All ages $355,713.1 $201,646.7 $101,981.8 $150,551.8 $77,956.6 $887, % 23% 11% 17% 9% 100% Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. Household income represents total income received in LIMRA Fact Book on Retirement Income

30 TABLE 10 Retirement Income by Source and Household Income Sources of Income ($ in millions) Household Income Social Security Pensions/Retirement Interest & Dividends Earnings Other <$25K $123, $13, $6, $5, $12, % 8% 4% 4% 8% $25K to $49.9K $121, $58, $15, $24, $20, % 24% 7% 10% 8% $50K to $74.9K $52, $46, $14, $30, $11, % 30% 9% 19% 8% $75K to $99.9K $25, $36, $15, $25, $10, % 32% 14% 23% 9% $100K+ $33, $46, $49, $63, $23, % 21% 23% 30% 11% All income levels $355, $201, $101, $150, $78, % 23% 11% 17% 9% Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. Household income represents total income received in TABLE 11 Retirement Income by Source and Household Income Sources of Retirement Income Household Income Social Security Pensions/ Retirement Interest & Dividends Earnings Other Total <$25K $12,461 $4,416 $386 $5,000 $3,600 $14,594 $25K to $49.9K $19,157 $12,360 $1,138 $13,868 $8,040 $34,284 $50K to $74.9K $21,813 $24,000 $2,500 $27,000 $10,000 $59,791 $75K to $99.9K $19,644 $35,136 $5,500 $40,000 $13,200 $86,020 $100K+ $23,026 $41,238 $20,194 $60,926 $20,000 $130,322 All income levels $15,556 $13,824 $1,218 $18,000 $6,564 $26,417 Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. Household income represents total income received in Fact Book on Retirement Income 2010 LIMRA

31 TABLE 12 Number of Retiree by Age and Source No. of Receiving from Each Source Age of Head of Household No. of Total Social Security Pensions/ Retirement Interest and Dividends Earnings Other Total 40 to , , , , , , , to , , , , , , , to 64 2,126,178 1,384,969 1,090,650 1,281, , ,768 2,069, to 69 4,706,531 4,277,917 2,146,656 2,668,814 1,363,545 1,268,141 4,651, to 74 4,295,277 4,009,551 1,937,101 2,384, ,789 1,135,716 4,255, to 79 4,430,716 4,131,264 1,801,606 2,519, ,842 1,163,853 4,363, ,785,440 6,412,778 2,454,462 3,751, ,717 1,806,851 6,716,898 All Ages 23,445,017 20,601,135 9,964,179 13,181,621 5,065,043 6,399,022 23,098,239 Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. Household income represents total income received in TABLE 13 Percentage of Retiree by Source and Age Sources of Income Age of Head of Household Social Security Pensions/ Retirement Interest and Dividends Earnings Other Total 40 to 54 44% 35% 49% 27% 33% 94% 55 to 59 30% 56% 54% 41% 37% 95% 60 to 64 65% 51% 60% 35% 30% 97% 65 to 69 91% 46% 57% 29% 27% 99% 70 to 74 93% 45% 56% 23% 26% 99% 75 to 79 93% 41% 57% 18% 26% 98% % 36% 55% 12% 27% 99% All ages 88% 43% 56% 22% 27% 99% Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. LIMRA Fact Book on Retirement Income

32 TABLE 14 Number of Retiree by Income and Source Sources of Income Household Income No. of Total Social Security Pensions/ Retirement Interest and Dividends Earnings Other Total <$25K 11,243,722 9,732,780 2,179,024 4,371, ,094 2,424,861 10,896,944 $25K to $49.9K 6,841,530 6,206,285 3,971,776 4,471,195 1,634,945 2,008,023 6,841,530 $50K to $74.9K 2,587,450 2,287,922 1,801,064 1,932,672 1,097, ,306 2,587,450 $75K to $99.9K 1,326,817 1,147, ,931 1,108, , ,499 1,326,817 $100K+ 1,445,499 1,226,913 1,030,385 1,298, , ,333 1,445,499 All income levels 23,445,017 20,601,135 9,964,179 13,181,621 5,065,043 6,399,022 23,098,239 Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. Household income represents total income received in TABLE 15 Percentage of Retiree by Income and Source Sources of Income Household Income Social Security Pensions/ Retirement Interest and Dividends Earnings Other Total <$25K 87% 19% 39% 8% 22% 97% $25K to $49.9K 91% 58% 65% 24% 29% 100% $50K to $74.9K 88% 70% 75% 42% 33% 100% $75K to $99.9K 86% 74% 84% 50% 37% 100% $100K+ 85% 71% 90% 54% 42% 100% All income levels 88% 43% 56% 22% 27% 99% Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on fully retired households. Household income represents total income received in Fact Book on Retirement Income 2010 LIMRA

33 TABLE 16 Household Income of Pre-Retirees (Aged 55 74) Age of Head of Household No. of Total Household Income ($ in millions) Income Income per Household 55 to 59 8,989,517 54% $746, % $83, to 64 5,659,895 34% $457, % $80, to 69 1,430,870 9% $133, % $93, to ,919 3% $43, % $88,406 Total 16,574, % $1,381, % $83,364 Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on households with no retirees and heads of household aged 55 to 74. Household income represents total income received in TABLE 17 Household Income of Pre-Retiree by Income Level Household Income No. of Total Income ($ in millions) Income Income per Household <$25K 3,136,567 19% $42, % $13,698 $25K to $49.9K 3,580,997 22% $132, % $36,879 $50K to $74.9K 3,068,926 19% $188, % $61,448 $75K to $99.9K 2,127,974 13% $183, % $86,282 $100K+ 4,659,736 28% $834, % $179,084 All income levels 16,574, % $1,381, % $83,364 Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. Analysis based on households with no retirees and heads of household aged 55 to 74. Household income represents total income received in LIMRA Fact Book on Retirement Income

34 TABLE 18 Number of Retired and Not Retired Individuals with Personal Income Over $50,000 Age of Head of Household Total Population Not Retired Retired Percent Retired <40 14,702,341 14,702, to 49 13,554,268 13,512,580 41, to 54 6,919,313 6,814, ,695 2% 55 to 59 5,812,571 5,467, ,575 6% 60 to 64 4,282,903 3,533, ,044 17% 65 to 69 2,343,975 1,308,956 1,035,019 44% 70 to 74 1,223, , ,777 61% 75 to , , ,959 78% 80 to ,755 79, ,596 83% ,538 36, ,609 88% Total 50,399,711 46,106,749 4,292,962 9% Individuals under age 40 classified as not retired. Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. TABLE 19 Number of Retired and Not Retired with Household Income Over $50,000 Age of Head of Household Total Population Not Retired Retired Percent Retired <40 98,150,316 98,150, to 49 29,048,265 28,903, , to 54 14,350,930 13,983, ,324 3% 55 to 59 12,106,642 11,073,293 1,033,349 9% 60 to 64 9,106,690 6,720,655 2,386,034 26% 65 to 69 5,630,749 1,949,472 3,681,276 65% 70 to 74 3,220, ,899 2,503,388 78% 75 to 79 2,158, ,921 1,892,914 88% 80 to 84 1,467, ,995 1,337,759 91% ,584 58, ,708 94% Total 176,219, ,952,784 14,266,268 8% Individuals under age 40 classified as not retired. Source: LIMRA analysis of U.S. Census Bureau s Current Population Survey, March 2009 Supplement. 34 Fact Book on Retirement Income 2010 LIMRA

35 TABLE 20, Debt, and Net Worth of by Retirement Status, Debt, and Net Worth ($ in billions) Financial Fully Retired Partially Retired Not Retired (Age 55 74) Individual Retirement Account (IRA) $1, $ $1, Defined Contribution Plan (DC) $26.21 $ $1, Defined Benefit Plan (DB) $ $ $ Retirement/Pension accounts $1, $1, $2, Stocks $1, $ $1, Mutual funds $1, $ $ Cash and equivalents $ $ $ CDs $ $ $ Annuities $ $85.56 $80.34 Bonds $ $ $ Life insurance $ $ $ Other $ $ $ Total Financial $6,463.6 $3,947.8 $6,547.4 Non-Financial Primary residence $4, $2, $4, Business $ $2, $5, Other residential $1, $ $1, Investment property $ $ $ Vehicles $ $ $ Other $ $98.66 $ Total Non-Financial $7,522.2 $5,480.2 $13,007.8 Debt $ $ $2, Net Worth $13, $8, $17, Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, For married couples, age group assignment based on age of oldest spouse. Analysis based on fully retired households, partially retired households, and on households with no retirees and heads of household aged 55 to 74. LIMRA Fact Book on Retirement Income

36 Fully Retired TABLE 21 Financial by Age Age of Head of Household No. of Total Financial ($ in millions) Financial Financial <55 289,448 $182,106.0 $629,149 $24, to ,943 $250,073.7 $490,395 $67, to 64 1,869,573 $618,631.9 $330,895 $34, to 69 3,461,583 $1,186,730.7 $342,829 $48, to 74 3,822,819 $1,589,926.8 $415,904 $41, ,459,296 $2,636,083.3 $230,039 $33,900 Total 21,412,662 $6,463,552.3 $301,857 $37,400 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, For married couples, age group assignment based on age of oldest spouse. TABLE 22 Financial by Income Level Household Income No. of Total Financial ($ in millions) Household Income Household Income <$25,000 10,431,968 $437,592.8 $41,947 $7,000 $25,000 to $49,999 6,264,078 $1,126,766.9 $179,878 $68,000 $50,000 to $74,999 2,222,496 $680,978.2 $306,402 $208,500 $75,000 to $99, ,403 $759,227.7 $829,392 $439,900 $100,000+ 1,578,716 $3,458,986.7 $2,191,012 $852,000 Total 21,412,662 $6,463,552.3 $301,857 $37,400 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, Fact Book on Retirement Income 2010 LIMRA

37 TABLE 23 Income by Wealth Strata Income Financial Asset Segments No. of Total Income ($ in millions) Income Income Low-net-worth: <$100K 13,815,666 $332,251.0 $24,049 $19,000 Middle market: $100K-$249K 3,320,665 $161,073.8 $48,506 $35,000 Mass affluent: $250K-$499K 1,925,589 $100,123.6 $51,996 $42,000 Affluent: $500K-$999K 1,107,812 $78,025.0 $70,432 $60,000 High-net-worth: $1.0 mil.-$3.49 mil. 924,258 $156,372.5 $169,187 $98,000 Mega-millionaire: $3.5 mil.+ 318,671 $265,573.7 $833,380 $336,000 All wealth strata 21,412,662 $1,093,419.7 $301,857 $37,400 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, TABLE 24 Financial by Wealth Strata Financial Financial Asset Segments No. of ($ in millions) Low-net-worth: <$100K 13,815,666 $299,076.7 $21,648 $9,700 Middle market: $100K-$249K 3,320,665 $565,242.2 $170,220 $174,400 Mass affluent: $250K-$499K 1,925,589 $668,246.0 $347,035 $325,200 Affluent: $500K-$999K 1,107,812 $770,713.1 $695,708 $670,000 High-net-worth: $1.0 mil.-$3.49 mil. 924,258 $1,588,314.2 $1,718, 475 $1,453,000 Mega-millionaire: $3.5 mil.+ 318,671 $2,571,960.1 $8,070,902 $5,301,500 Total 21,412,662 $6,463,552.3 $301,857 $37,400 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, LIMRA Fact Book on Retirement Income

38 TABLE 25 Non-Financial by Wealth Strata Non-Financial Financial Asset Segments No. of Total ($ in millions) Low-net-worth: <$100K 13,815,666 $2,354,741.8 $170,440 $101,800 Middle market: $100K-$249K 3,320,665 $1,094,786.5 $329,689 $206,500 Mass affluent: $250K-$499K 1,925,589 $808,802.4 $420,028 $296,800 Affluent: $500K-$999K 1,107,812 $642,380.0 $579,864 $200,500 High-net-worth: $1.0 mil.-$3.49 mil. 924,258 $1,398,952.5 $1,513,595 $626,900 Mega-millionaire: $3.5 mil.+ 318,671 $1,222,524.1 $3,836,324 $2,206,600 Total 21,412,662 $7,522,187.3 $351,296 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, TABLE 26 Debt by Wealth Strata Debt Financial Asset Segments No. of Total ($ in millions) Low-net-worth: <$100K 13,815,666 $274,370.8 $19,859 Middle market: $100K-$249K 3,320,665 $105,105.9 $31,652 Mass affluent: $250K-$499K 1,925,589 $54,224.6 $28,160 Affluent: $500K-$999K 1,107,812 $19,025.2 $17,174 High-net-worth: $1.0 mil.-$3.49 mil. 924,258 $78,524.8 $84,960 Mega-millionaire: $3.5 mil.+ 318,671 $60,785.2 $190,746 Total 21,412,662 $592,036.4 $27,649 Source: LIMRA analysis of 2007 Survey of Consumer Finances, Federal Reserve Board, Fact Book on Retirement Income 2010 LIMRA