Retirement Sustainability Report

Thank you for taking time to visit Annuity Digest.  The information on this page is intended to help you better understand the personalized retirement sustainability results that were sent to you in email.

This page contains the following information:

Explanation of Results

Retirement sustainability refers to the likelihood that you have enough savings to support your desired level of spending in retirement.  In other words, your result represents the chance that your stated level of retirement spending will last over your expected lifetime.

For example, a retirement sustainability result of 90 percent means that your desired retirement spending is sustainable (will last throughout your expected lifetime) 9 out of 10 times, while a retirement sustainability result of 60 percent means that your desired retirement spending is sustainable 6 out of 10 times.

Your retirement sustainability result is not a figure that is cast-in-stone.  It is a statistical calculation based on on number of different variables--many of which were provided by you when you submitted the form on Annuity Digest.

Why is this Important?

Knowing the likelihood that your retirement spending plans are in-line with your available resources is a critical part of the retirement planning process.

A low retirement sustainability result can serve as an indication that you are at risk of running out of money during retirement.  This risk is referred to as longevity risk, and it is one of the most daunting retirement planning challenges.

The meaning of an acceptable retirement sustainability result (and therefore acceptable level of risk) will vary from person-to-person.  

One way to think about your retirement sustainability result is through an analogy.  For example, what would you think if a surgeon told you that the chances of a successful surgery are 8 in 10?  Would this be acceptable to you?  Most people would want the chances of success well in excess of 90 percent or 9 out of 10.

Longevity risk is pretty serious as well, and most people would likely take whatever action required to minimize the risk.    

What Can You Do with this Information?

There are a number of factors involved in the calculation of your retirement sustainability result, and several of these were provided by you.

It is important to understand how these factors affect your retirement sustainability result because some of them are “variable” (they can change based on your decisions and actions):

  1. Your Desired Annual Retirement Spending: Decreasing this figure will increase your retirement sustainability while an increase in desired spending will decrease your result.
  2. Your Current Nest Egg: More savings will support more spending. Increasing your private savings will increase retirement sustainability while decreasing retirement savings will decrease the result.
  3. Your Age and Gender: Age and gender affect your life expectancy. Both of these factors are fixed, but your life expectancy does change as you age and women tend to live longer than men.  A long life expectancy requires more resources than a short life expectancy, so longevity and your retirement sustainability actually move in the opposite directions.
  4. Your Asset Allocation: Your results are based on an assumption that your nest egg is split evenly (50/50) between stocks and bonds. Changing your asset allocation can affect retirement sustainability.
  5. Your Product Allocation: Your results are based on the assumption that you have no guaranteed income from annuities.  Increasing the amount of income that comes from guaranteed sources such as annuities can increase your retirement sustainability.
  6. Your Marital Status: In general, a married couple will require more resources (and have a higher combined life expectancy) than a single person.  As a result, all other things being equal, a married couple will have a lower retirement sustainability result than a single person.

Some Additional Things for You to Consider:

  • Connect with a Financial Advisor: The tools that generated the results you received in email can be used to generate many different “what-if” scenarios.  You are welcome to further explore these tools through a conversation with a financial advisor.  Click here to connect with a financial advisor.
  • Taxes: It is assumed that the desired spending figure you provided is after taxes.  If not, your retirement sustainability figure is actually much lower since your desired retirement spending and therefore required income will decrease after taxes.
  • Social Security: You may have thought about Social Security income before you provided your desired retirement spending number.  For example, maybe your actual desired retirement spending is $50,000, but you assumed $20,000 in Social Security income and provided the net $30,000 figure when submitting your information.  If not, incorporating Social Security payments into your desired spending will increase retirement sustainability.
  • Pension Income: If you have any sources of pension (not a 401k type of plan) income, it will also increase your retirement sustainability.   
  • Financial Legacy: Financial legacy refers to the amount of money you wish to leave for your heirs. In other words, financial legacy refers to the amount you want to leave as an inheritance.  There is a basic trade-off between retirement sustainability and financial legacy: the higher your desired financial legacy, the lower your retirement sustainability.