May 22, 2019

US Seniors Facing Staggering Retirement Shortfall

According to a study by Boston College’s National Retirement Risk Index (NRRI), nearly 50% of US households are in jeopardy of not having enough saved for retirement, and they further note that “explicitly including health care in the Index further drives up the share of households ‘at risk.’” In fact, out of over 2,000 US adults surveyed by NerdWallet, only 32% believe that they will have saved enough money for retirement. Furthermore, 50% of respondents thought that $1 million in retirement savings would be adequate while 50% either don’t think it will be enough or are unsure (31% and 19%, respectively).

To parse this further, an interesting study by GoBankingRates shows how long $1 million in retirement savings lasts, on average, in each state in the US. The study suggests that the average length of retirement is about 16 years (ages 63-79). But given that females in the US have an average life expectancy of 81 years old, many Americans need to plan on their savings lasting closer to 20 years. And given that the largest life expectancy companies in the life insurance industry recently extended their life expectancies for older age mortality by 11%, it is better to err on the side of caution and go with a longer estimate for the length of retirement in the US. According to the GoBankingRates study, nearly 21% of Americans will not have enough saved with $1 million in the bank using the conservative 16 year retirement estimate, but a whole 32% of Americans won’t have enough saved with $1 million in retirement savings using the 20 year time frame.

And if US seniors’ retirement wasn’t on shaky enough ground, Transamerica reports that the median savings for Americans in their 60’s is $172,000—not anywhere near the $1 million nest egg that the GoBankingRates study showed may not be enough. This huge disparity underscores the importance of alternative funding sources needed for our seniors, who are clearly at risk in being able to fund their retirement. One of the most under-utilized assets for seniors is tapping into the hidden value of their life insurance policy through a life settlement. For most seniors, by retirement age they no longer need their life insurance policy for the same reasons that they purchased it originally (e.g.: to protect their young family, a business, paying off their mortgage, etc). In addition, the premiums have been steadily rising and will continue to do so. As a result, so many seniors end up just surrender their policy or let it lapse for little or no value at all.

life settlement is a powerful option for a policy holder who no longer needs or wants the coverage, and especially if they need to supplement their retirement nest egg.

A life settlement is the sale of a life insurance policy to a third party for more than the surrender value, but less than the death benefit. So instead of giving the policy back to the insurance company (which they would love) you can ask an investor what your policy is worth to them. That is very much over-simplified, so it is highly recommended to discuss your case with a life settlement expert (either a life settlement provider or broker) who is licensed in your state. These life settlement experts have the experience and expertise to guide you to the highest valuation for your policy.

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