In a new research article, LIMRA raised concerns about the ability of future retirees to cover their basic living expenses in retirement if they cannot secure more sources for lifetime-guaranteed income.

Pre-retirees—workers within 10 years of their of anticipated retirement dates—are less likely than retirees to say they will be able to cover basic living expenses in retirement with lifetime-guaranteed income sources, LIMRA research shows.

“[The pre-retiree cohort] will need to figure out proactively how to create sustainable income, with a higher likelihood of failure than what their parents are facing,” says Matt Drinkwater, corporate vice president of annuity and retirement income research at LIMRA, via email.

LIMRA data showed 70% of retiree respondents said between Social Security, traditional pensions and annuities, they expect to have sufficient lifetime-guaranteed income to cover all their basic living expenses. Workers without a traditional defined benefit pension will have to patch together their sources for guaranteed income in retirement, adds Drinkwater.

“The parents of today’s pre-retirees are the current retirees, who are, for the most part, enjoying comfortable retirements with the peace of mind provided by sufficient lifetime-guaranteed income,” he says. “The next generation to enter retirement will need to cover their expenses not with pensions, but instead by tapping their accumulated balances in [defined contribution] plans, IRAs and after-tax accounts, none of which automatically provide a lifetime-guaranteed payout.”

Overall, six out of 10 respondents were confident their savings and investments will last at least until the age of 90, LIMRA data showed.

The LIMRA data, split by retirement and employment status, revealed 12% of retirees consider themselves retired, but are also working for pay, according to a LIMRA spokesperson.

The research gauged confidence that their savings will last in retirement based on respondents’ agreement with the statement, “I am confident that my savings and investments won’t run out if I live to be 90 years old.”

Among non-retired workers:

• 18% strongly agree, 35% somewhat agree, 23% neither agree nor disagree, 16% somewhat disagree and 8% strongly disagree.

Among retirees who are still working for pay and consider themselves retired:

• 31% strongly agree, 41% somewhat agree, 15% neither agree nor disagree, 9% somewhat disagree and 4% strongly disagree; and

Among all retirement investors:

• 23% strongly agree, 37% somewhat agree, 19% neither agree nor disagree, 14% somewhat disagree and 7% strongly disagree.

Unsurprisingly, workers with more household investable assets are more confident, as 51% of consumers with $2 million or more in household investable assets are confident their savings and investments will not run out if they live to age 90, compared to only 12% of investors with $100,000 to $249,999 in assets, LIMRA found.

The research also showed the top retirement income sources expected by pre-retirees are Social Security, at 64%; DC plans, 61%; personal savings in non-qualified investments, 43%; traditional IRAs, 39%; and traditional defined benefit pensions, 27%.

Retirees’ actual retirement income sources were identified as 70% coming from Social Security, 38% from defined benefit pensions, 17% from personal savings, 15% from traditional IRAs and 8% from DC plans.

In 2022, 44% of pre-retirees said they will receive enough from all their lifetime-guaranteed sources to cover all their basic living expenses throughout retirement, compared to 58% in 2017, LIMRA found.

Greater anxiety over longevity risk—the risk of outliving ones’ assets) may drive retirement plan participants to embrace guaranteed lifetime income sources, including annuities, says retirement plan adviser David Macchia, founder and CEO of Boston-based Wealth2k.

“The dramatic decline in the percentages of people who believe they will have enough secure income sources to cover essential retirement expenses is unsurprising in the context of a broader loss of confidence in the economy among younger Americans,” Macchia says. “Economic anxieties will drive interest in annuities and will account for an increasing allocation of savings to purchase guaranteed income.”

The LIMRA article, ‘It’s No Longer Your Parents’ Retirement,’ was based on data from the study, Retirement Investors: Key Trends and Opportunities, conducted in August 2022, according to the spokesperson. LIMRA engaged an online panel to survey individuals. The survey generated 4,008 responses: 2,159 retirees and 1,849 non-retired workers.