As Pensions Fade, Retirees Will Need More Savings

Future retirees will need upwards of $400,000 to make up for the pension income shortfall, IRI says.

Eighty-one percent of today’s retirees receive some income from a pension plan, and for 42% of these people, their pension provides half or more of their retirement income, according to a study by the Insured Retirement Institute (IRI). However, for those not yet retired, only 24% have a defined benefit (DB) plan.

IRI estimates that as many as 56 million Baby Boomers will not receive retirement income from a pension, and that future retirees will need upwards of $400,000 to make up for this income shortfall.

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“Replacing pensions and achieving financial security these plans provide to retirees will be a key issue for future generations,” says IRI President and CEO Cathy Weatherford. “As Baby Boomers retire in greater numbers over the next decade, and as Gen Xers begin to leave the workforce, financial professionals have an historic opportunity to help Americans create their own pensions, through Social Security optimization and the use of lifetime income strategies, to help their clients attain the same security, lifestyles, confidence and positive outlooks as the participants in this study.”

The study also discovered that nearly 60% of retirees have worked with a financial adviser, and 93% of these people say the advice they received has been effective. Seventy-two percent of retirees who own an annuity are satisfied with it. Retirees also face unexpected expenses; 40% have suffered a major health event, such as a heart attack or stroke, and 25% have faced a major non-medical event, such as a major home repair.

More than one-quarter, 27%, have relocated their primary residence in retirement, and of these people, 60% did so for lifestyle reasons, and 30% in order to lower their cost of living.

While 67% of retirees think their chance of requiring long-term care is less than 25%, the Department of Health and Human Services (HHS) believes that 70% of those turning 65 today will need such services. Sixty-percent think that Medicare will pay for their long-term care expenses.

Greenwald & Associates conducted the survey among 806 retirees between the ages of 65 and 80 who retired with at least $50,000 in investable assets and have been retired for at least five years. The full report, “It’s All About Income,” can be downloaded here.

Supreme Court Stays Relief in Dignity Health Plan Case

An appellate court agreed with a district court that Dignity Health’s pension plan was not a “church plan” under ERISA, and ordered it to get into compliance with ERISA.

Supreme Court Justice Anthony Kennedy has granted a stay of a court’s mandate that Dignity Health get its pension plan in compliance with the Employee Retirement Income Security Act (ERISA) until a decision is made on the health care provider’s petition for writ of certiorari of its lawsuit.

In July 2014, the U.S. District Court for the Northern District of California granted a motion for partial summary judgment against Dignity Health, finding its pension plan was not a “church plan” as defined under ERISA. The court took a step toward granting plaintiff Starla Rollins’ ultimate appeal for declaratory and injunctive relief directing Dignity Health to bring its pension plan into compliance with ERISA—including its reporting, vesting and funding requirements. The 9th U.S. Circuit Court of Appeals agreed with the district court’s findings.

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Dignity Health then petitioned the Supreme Court to weigh in on the case. According to the high court’s docket on the case, should the petition for a writ of certiorari be denied, this stay shall terminate automatically. In the event the petition for a writ of certiorari is granted, the stay shall terminate upon the issuance of the judgment of this Supreme Court.

Advocate Health Care and St. Peter’s Healthcare System have also filed petitions for writ of certiorari with the U.S. Supreme Court for their cases.

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