Wishful Thinking Dominates Withdrawal Rates
June 29, 2008
A MetLife Mature Market Institute survey shows that 43% of pre-retirees mistakenly believe they can spend 10% or more of their savings each in retirement while still preserving their principal.
On the contrary, most retirement experts advise retirees to spend only 4% a year to minimize the risk of exhausting their savings before they die. Overall, MetLife’s 2008 Retirement Income IQ Test found that 69% of pre-retirees overestimate the rate at which they should draw down from their savings.
MetLife’s research also showed that about 60% of Americans underestimate their life expectancy and nearly half underestimate the percentage of their pre-retirement income that they’ll need to replace during retirement.
The results showed improvements in several areas of awareness since a similar test in 2003, however. Fifty-six percent of respondents now say they understand that longevity risk poses the greatest financial risk in retirement, 73% know the circumstances under which 55-year-olds can collect full Social Security benefits and 62% understand the basics of financing long-term care.
“While we would like to have seen more dramatic increases in the scores, Americans are improving their retirement income IQs,” said Sandra Timmerman, director of the MetLife Mature Market Institute. “Yet, there are still far too many misconceptions about retirement income issues.”
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