An Age-Old Problem: How to Make Sure Your Money Lasts as Long as You Do
Wall Street has a message for investors: Maybe you'll live.
For years, mutual-fund companies have pounded away at the need to save for retirement, while life and health insurers have stressed the risk of ill health, disability and an early death. But with the baby boomers rapidly approaching retirement, Wall Street's tune is changing.
Now, fund companies and insurers are focusing on boomers' need for income once they're retired -- and the big push is to get seniors to realize that their retirement could last longer than they ever imagined.
Living long. To highlight "longevity risk," Genworth Financial, of Richmond, Va., has been running a series of advertisements featuring centenarians, while ads from New York's MetLife depict Snoopy decorating a 90th birthday cake. Insurers are hoping to gin up interest in a slew of products, including immediate-fixed annuities, variable annuities with living benefits, longevity insurance and long-term-care insurance.
Mutual-fund companies are also getting in on the act. Two of the largest, Boston's Fidelity Investments and Vanguard Group, of Malvern, Pa., now sell immediate annuities, which can provide lifetime income. Both fund giants also recently tweaked their "life-cycle" funds, which are diversified portfolios geared toward particular retirement dates.
GOLDEN YEARS?
Today's retirees could live into their 90s -- but they aren't prepared.
? A survey of retirees found 38% are concerned they will deplete their savings and be left with only Social Security.
? If retirees lived five years longer than expected, 53% say they would slash spending and 42% would tap money intended for heirs.
? Among retirees, 68% of men and 66% of women underestimated life expectancy for people of their age.
Source: Society of ActuariesFidelity, citing rising life expectancies, raised the stock exposure in its life-cycle funds aimed at investors closest to retirement. Meanwhile, Vanguard cranked up the stock allocation for all its Target Retirement funds, including boosting the stock holdings of its Target Retirement Income fund to 30% from 20%.
The Income fund's rejiggering "didn't materially increase the downside risk," says Catherine Gordon, head of financial-planning services at Vanguard. But if an investor is making regular withdrawals, "it raised the likelihood that the portfolio would last until someone was age 85 or 90."
The notion that we could live to a ripe old age might seem like welcome news. Yet many people clearly haven't got the message. One recent survey found that 67% of retirees and 61% of working-age people underestimated the life expectancy for folks of their age.
"There's the potential for a lot of people to spend down their savings too early in retirement," worries Steven Siegel, a research actuary at the Society of Actuaries in Schaumburg, Ill., which commissioned the survey.
Weighing the odds. Want to make sure you don't outlive your money? Here are four key things to keep in mind:
? The longer you live, the longer you can expect to live. Suppose you were born in 1940. At birth, your life expectancy would have been age 70 if you're a man and 76 if you're a woman.
Since then, many folks born in 1940 have died and those early deaths aren't considered when calculating the life expectancy for those who remain. Result: If you are still alive today, you can expect to live until around age 82 if you're a man and age 85 if you're a woman.
? Life expectancies are averages -- and surprisingly few of us are average. Based on the above life expectancies, you might imagine there's a good chance you will die during your 80s.
But in fact, 44% of today's 65-year-old men will be dead by age 80 -- and 18% will live to age 90 or beyond, according to Hartford Financial Services in Hartford, Conn. Similarly, 31% of today's 65-year-old women will die by age 80 and 29% will live into their 90s.
"There may be 5% to 10% of 65-year-olds who are in poor enough health that they don't have to worry about living a long time," says Ken McCullum, a senior vice president in Hartford's wealth-management group. "But the other 90% or 95% could live a very long time. There's a lot of uncertainty for those folks."
? If you are married, one of you will likely live longer than average. While most 65-year-old men will die before age 85 and only half of 65-year-old women will live to that age, there's a 68% chance that at least one member of a couple will live until age 85 and a 42% chance that one of them will survive to age 90.
? Your odds of beating the averages may be higher than you think. The numbers above are based on the general U.S. population.
But if you're reasonably affluent and you've taken decent care of your health, you're likely to live longer. Indeed, insurers figure they are dealing with wealthier, healthier people -- and assume their clients will live maybe two years longer than the general population.
What to do? Confronted with the chance that you or your spouse will live a surprisingly long time, you might buy an income annuity, and you should probably keep your annual portfolio withdrawal rate to 5% or below. But your smartest move may have nothing to do with Wall Street.
"If you're really worried about outliving your savings, the best thing you can do is to delay starting Social Security," argues Henry Hebeler, who runs
www.analyzenow.com, a Web site devoted to retirement issues.
Let's say you are age 62. Instead of taking Social Security today, you could put off benefits until as late as age 70 -- thus locking up a lifetime stream of inflation-linked income that's 76% larger.
让退休金和你一样长寿
华尔街股市在向投资者传递一个新消息：也许你会更长寿。
多年来，共同基金公司大力宣传为退休做好储蓄准备的必要性，寿险和健康险公司也强调疾病、残疾和提早死亡的风险。不过，随着美国婴儿潮一代接近退休年龄，华尔街的基调发生了变化。
现在，共同基金和保险公司集中关注的是此类人群退休后的收入需求，它们努力想让中老年人意识到，他们的退休岁月会比想象的长得多。
为提醒人们长寿所带来的风险，弗吉尼亚州的Genworth Financial公司推出一系列以百岁老人为主题的广告，而纽约大都会寿险公司(MetLife)也在广告中让史努比(Snoopy)装饰一个九十大寿的生日蛋糕。保险公司希望籍此推广一系列产品，包括即期固定年金、享受生存补助金的浮动年金、长寿保险和长期医疗保险等。
共同基金公司也不甘落后。波士顿的Fidelity Investments基金和宾西法尼亚州的Vanguard Group基金正在销售可以提供终生收益的即期年金产品。两大巨头最近也调整了其“生命周期”(life-cycle)类基金，使投资组合更趋向特定的退休日期。
注意到寿命延长的趋势后，Fidelity公司提高了其“生命周期”类基金中股票的比重，此类基金的目标客户群是最接近退休的投资者。与此同时，Vanguard也增加了其Target Retirement类基金的股票比重，将Target Retirement Income基金的股票投资比重从20%提高到30%。
该基金的配比调整并未从本质上增加投资风险，Vanguard财务规划部的负责人凯瑟琳?高顿(Catherine Gordon)说道。不过，如果投资者退休后固定支取年金的话，那么提高股票所占比例可能将投资组合的持续时间延长至投资者达到85岁或90岁。
人类寿命的延长似乎看来是个好消息，但显然很多人似乎对此一无所知。最近一项调查发现，67%的退休人士和61%的在职人员都低估了他们的预期寿命。
“很多人可能会在退休后过早地消费了退休基金。”位于伊里诺斯州Schaumburg市的保险精算协会(Society of Actuaries)的精算师史蒂文?西格尔(Steven Siegel)担 地说道。该机构进行了上述调查。
想确保退休后资金方面没有后顾之忧吗？那有四个关键点一定要记住：
1、你活的时间越长，预期寿命也会更长。假设你生于1940年，当时的预期寿命是男子70岁，女子76岁。
随着时光飞逝，很多1940年出生的男女纷纷去世，但是当计算剩下的1940年出生的人的预期寿命时去世的人都不在考虑范围。结果就是：如果你今天仍然在世，那么你的预期寿命将是男子82岁，女子85岁。
2、预期寿命是平均值，而奇特的是很少有人只活到平均值。根据上述的预期寿命数字，你也许以为自己很可能在80多岁时去世。
然而，据康涅狄格州Hartford Financial Services公司称，事实上44%的该群体男子会在80岁时去世，而18%的能活过90岁。同样，31%的该群体女子会在80岁时去世，而29%的能活过90岁。
“该群体中可能有5%到10%的人健康状况不佳，不必考虑自己如果长寿怎么办。”该公司一位负责财富管理的资深副总裁肯?麦克库伦(Ken McCullum)说，“但其余90%到95%的人能活很长时间，他们的未来有很多不确定性。”
3、如果你是已婚人士，那么夫妻中有一方可能比平均寿命活得更长。该群体的大多数男子会在85岁前去世，只有约一半女子能活到这个岁数；不过，从夫妻角度来看，夫妻一方能活到85岁的几率至少是68%，能活到90岁的几率是42%。
4、你活过平均寿命的可能性会比你想象的要高。上面提到的数字是根据对美国一般人群调查得出的。
但如果你相对富有，平时又十分关心自己的健康状况，那你可能会比一般人更长寿一些。事实上，保险公司认为其客户是更富有、更健康的人群，因此可能比一般人群多活两年左右。
那么你该如何应对？为解决你或你的另一半的寿命超乎预期所带来的经济问题，你不妨购买一个年金产品，并将年支取比例控制在5%以下。不过，你这个最明智的举措也许和华尔街无关。
“如果你真的很担心退休金不够，那么最好延缓启动退休福利，”致力于退休问题的网站
www.analyzenow.com的负责人亨利?贺贝勒(Henry Hebeler)说道。
假设你今年62岁，那么建议你不要现在启动退休福利，而是等到70岁再说，这样得到的终生退休金（已考虑通货膨胀因素）要比原先多出76%。
Jonathan Clements
