A small step today can make a big difference in retirement. “People who save regularly for retirement tend to be happier with their retirement planning than those who do not,” says Kathrin Nies, author of 'Why Saving on a Regular Basis May be Wise', a study conducted by the Munich Center for the Economics of Aging and Allianz Global Investors.
Funding a 30-year retirement will take financial planning prowess as you
juggle the effects of inflation, distributions, taxes, asset allocation, and
expenditures. Are you up to the task?
Principal protection with upside potential. 20% rollover bonus. 401k,IRA rollover eligible. For more information call (888) 235-8060 or visit us at www.AdvisorRick.com.
This document provides information to help readers determine how much to save for retirement. It recommends figuring out retirement income needs based on planned retirement age, desired lifestyle, life expectancy, expected investment returns, and whether principal will be drawn down. It then discusses building a retirement fund by saving as much as possible as early as possible, using employer-sponsored plans that offer matching contributions, IRAs, annuities, and other investments. Employer plans, IRAs, annuities, and other options each have unique tax advantages and disadvantages to consider.
Funding a 30-year retirement will take financial planning prowess as you
juggle the effects of inflation, distributions, taxes, asset allocation, and expenditures. Are you up to the task?
This document discusses key considerations for planning a 30-year retirement. It notes that factors like inflation, taxes, health costs, longevity, and asset allocation must all be accounted for. Retirees may need income for 50 years or more, and inflation could significantly erode purchasing power over such a long period. The document recommends developing cash flow models with a financial advisor to identify gaps, setting a sustainable 4% annual withdrawal rate, and maintaining a contingency fund to address unexpected needs. Diversifying investments and regularly transferring funds are also suggested to balance risks.
- Pension plans face a major mystery in accurately valuing their assets and liabilities given uncertainties around future market returns, inflation, and other economic factors.
- They estimate future returns, called the expected rate of return, to smooth out market volatility but these estimates are often unrealistic and do not reflect the global bond bubble.
- With most pension plans already running deficits, an accurate expected rate of return that incorporates the risks of the bond bubble popping could show significantly larger deficits than currently reported and require greater employer contributions.
Robert Feinholz: Planning for a 30 year retirementForman Bay LLC
Robert Feinholz: Planning for a 30 year retirement.
Funding a 30-year retirement will take financial planning prowess as you juggle the effects of inflation, distributions, taxes, asset allocation, and expenditures. Are you up to the task?
Robert Feinholz: The art of managing retirement assumptionsForman Bay LLC
Robert Feinholz: The art of managing retirement assumptions
A retirement plan is built on a set of assumptions that can’t be validated until it’s too late. One key to successful retirement planning is carefully setting assumptions and revising them often.
Funding a 30-year retirement will take financial planning prowess as you
juggle the effects of inflation, distributions, taxes, asset allocation, and
expenditures. Are you up to the task?
Principal protection with upside potential. 20% rollover bonus. 401k,IRA rollover eligible. For more information call (888) 235-8060 or visit us at www.AdvisorRick.com.
This document provides information to help readers determine how much to save for retirement. It recommends figuring out retirement income needs based on planned retirement age, desired lifestyle, life expectancy, expected investment returns, and whether principal will be drawn down. It then discusses building a retirement fund by saving as much as possible as early as possible, using employer-sponsored plans that offer matching contributions, IRAs, annuities, and other investments. Employer plans, IRAs, annuities, and other options each have unique tax advantages and disadvantages to consider.
Funding a 30-year retirement will take financial planning prowess as you
juggle the effects of inflation, distributions, taxes, asset allocation, and expenditures. Are you up to the task?
This document discusses key considerations for planning a 30-year retirement. It notes that factors like inflation, taxes, health costs, longevity, and asset allocation must all be accounted for. Retirees may need income for 50 years or more, and inflation could significantly erode purchasing power over such a long period. The document recommends developing cash flow models with a financial advisor to identify gaps, setting a sustainable 4% annual withdrawal rate, and maintaining a contingency fund to address unexpected needs. Diversifying investments and regularly transferring funds are also suggested to balance risks.
- Pension plans face a major mystery in accurately valuing their assets and liabilities given uncertainties around future market returns, inflation, and other economic factors.
- They estimate future returns, called the expected rate of return, to smooth out market volatility but these estimates are often unrealistic and do not reflect the global bond bubble.
- With most pension plans already running deficits, an accurate expected rate of return that incorporates the risks of the bond bubble popping could show significantly larger deficits than currently reported and require greater employer contributions.
Robert Feinholz: Planning for a 30 year retirementForman Bay LLC
Robert Feinholz: Planning for a 30 year retirement.
Funding a 30-year retirement will take financial planning prowess as you juggle the effects of inflation, distributions, taxes, asset allocation, and expenditures. Are you up to the task?
Robert Feinholz: The art of managing retirement assumptionsForman Bay LLC
Robert Feinholz: The art of managing retirement assumptions
A retirement plan is built on a set of assumptions that can’t be validated until it’s too late. One key to successful retirement planning is carefully setting assumptions and revising them often.
Robert Feinholz: What is the top asset class indentified for retirementForman Bay LLC
The study found that lifetime income annuities can provide secure retirement income for 25-40% less than other traditional methods thanks to risk pooling. Income annuities address the risk of outliving one's savings by providing guaranteed lifetime income that cannot be replicated by other asset classes. Covering basic living expenses with income annuities provides greater flexibility to take more investment risk in other portions of one's portfolio. Recent innovations have increased the desirability of income annuities.
Milliman Paper - bespoke solutions is new blackandyshep
This document discusses retirement planning challenges in light of upcoming pension reforms in the UK. It identifies four key risks retirees face - longevity, inflation, lack of flexibility, and volatility. Existing retirement products may not adequately address these risks. The reforms shift responsibility and risk from the government to individuals. The document proposes a 'bucketing' framework to help advisers create customized retirement portfolios that blend products to better meet clients' financial and emotional needs by addressing the four risks.
A retirement plan is built on a set of assumptions that can't be validated until it's too late. One key to successful retirement planning is carefully setting assumptions and revising them often.
This document provides an overview of investing basics and different types of investments. It discusses the importance of saving, paying off debts, and having insurance as the foundation of investing. It also summarizes key concepts like risk tolerance, time horizon, liquidity needs, and how stocks and bonds work as investments. The document emphasizes diversification and having an appropriate strategy for each investor's unique financial goals and situation.
A self guide towards financial planning. We ourselves can manage our finances, so here comes phase-1 describing about few topics. Stay tuned for the remaining topics in phase-2.
1) The document discusses various aspects of personal financial planning such as insurance, emergency funding, retirement planning, and investment.
2) It emphasizes the importance of having health, life, and property insurance. It also stresses the need to have an emergency fund equivalent to at least 12 months of normal living expenses.
3) The document recommends starting retirement planning as early as possible through sustained systematic investment in well-diversified equity funds and the Public Provident Fund to accumulate enough for a comfortable retirement over 30 years or more after stopping work.
The Art of Managing Retirement AssumptionsForman Bay LLC
A retirement plan is built on a set of assumptions that can't be validated until it's too late. One key to successful retirement planning is carefully setting assumptions and revising them often.
The document discusses the importance of carefully setting retirement planning assumptions and revising them over time as new information becomes available. It notes that small differences in assumptions like rates of return or inflation can significantly impact retirement projections. It recommends collaborating with an advisor to set reasonable assumptions that account for an individual's specific situation and goals. Regularly revising assumptions is important to keep the retirement plan on track as circumstances change.
This document discusses the importance of carefully setting assumptions when planning for retirement. It notes that retirement projections rely on assumptions about retirement date, living expenses, inflation rates, investment returns, and life expectancy. Even small differences in assumptions can significantly impact projections. The document advises regularly revising assumptions as new information becomes available. It also recommends collaborating with an advisor who can help determine reasonable assumptions based on individual circumstances and revise plans accordingly over time.
The document discusses the importance of carefully setting retirement planning assumptions and revising them over time as circumstances change. It notes that small differences in assumptions like rates of return or inflation can significantly impact retirement projections. It recommends collaborating with an advisor to set reasonable assumptions that account for an individual's specific situation and goals. Regularly revising assumptions is key to keeping a retirement plan on track.
This document provides an overview of personal financial planning. Personal financial planning involves analyzing one's current financial position and predicting short and long-term needs. It includes planning for acquiring assets like investments and property, managing one's financial position, saving and investing, managing liabilities and insurance, tax planning, employee benefits, retirement, and estate planning. Saving and investment planning becomes more important as income increases to overcome inflation. Insurance can help manage risks like liability, death, health issues and long-term care, while also providing some tax benefits. Retirement planning determines how to fund expenses after work, while estate planning involves distributing assets after death typically through a will.
Most Canadians are doing reasonably well financially, with an average financial well-being score of 66 out of 100. Three quarters of Canadians scored above 50, indicating they are somewhat or securely financially. However, many Canadians struggle with financial resilience for the future and feeling financially comfortable, even if they can meet current commitments. Psychological factors like confidence and attitudes towards money are strongly related to financial well-being, more so than economic factors alone. Building buffers and preparing for financial setbacks could help improve Canadians' financial well-being.
Identifying the 12 things that EVERYONE gets wrong about financial planning, Understanding insurance, Demystifying savings and investments, Wading through the banking and lending challenges, Effective tax and estate planning
Professor Jamie Hopkins, co-director of The American College New York Life Center for Retirement Income, asked 12 leading financial planners and professors at The American College of Financial Services to give their tips for helping your clients secure an optimal financial outlook.
A document discusses accumulating funds in a deferred fixed interest and indexed annuity for retirement. It describes how annuities can be used to systematically save money and guarantee retirement income that cannot be outlived. It then provides details on sources of retirement income, obstacles to retirement planning, and how annuities can help overcome those obstacles by allowing tax-deferred growth and converting savings into guaranteed lifetime income.
Welcome to the fifth edition of Outline, Redington’s quarterly collection of thought-pieces designed to help institutional investors make smarter and more informed decisions.
This edition features short articles on the future of pensions policy, the complexities of running a pension scheme and how technology can help overcome them, risks inherent from gilt and swap rate differences, an outcome-driven approach to fund management, a review of asset classes in 2013, plus an overview of the global macro environment.
We hope you find the articles interesting and helpful as you consider how best to manage the risk-adjusted return of your portfolios
This document provides information about retirement planning and risks to consider when planning for retirement. It discusses the importance of having a retirement plan that incorporates predictable income, access to assets for flexibility, and growth opportunities. This allows the plan to address risks like longevity risk, inflation risk, health care costs, market risks, and excessive withdrawals. The document recommends a retirement strategy with three components: a predictable income stream, access to liquid assets, and growth potential. This can help retirees feel confident in their ability to cover living expenses and maintain their standard of living. Key considerations for the strategy include when income will be needed and how much, which depend on the individual's retirement horizon, needs, and risk tolerance.
This document discusses key factors in retirement planning, including increased life expectancy, inflation, declining pensions, and health care costs. It outlines 5 steps for retirement planning: 1) set goals, 2) estimate expenses, 3) determine resources, 4) estimate savings needed, and 5) make adjustments if savings are insufficient. The document emphasizes starting to save early, maximizing tax-deferred savings plans, diversifying investments, and seeking professional financial planning assistance.
Public pensions are on the verge of exploding municipal and the state budget in coming years.
Generational theft is a strong language, but Richard Dreyfus, Senior Fellow at the Commonwealth Foundation beleives that this looming timebomb" has the potential to bankrupt our cities and our state. He made complelling arguments and marshalled the facts to present a simple, compelling and thought provoking presentation.
The Allianz Center for Technology’s Risk Pulse report assesses the state of road safety worldwide and spells out the components of a culture of safety to reduce global accident risks.
Microinsurance - Demand and Market Prospects. A Three-Country Study: LaosOpen Knowledge
In 2006, Allianz AG, GTZ and UNDP teamed up in a public-private partnership to research the potential of a market-based mechanism to reduce poverty. This study analyzes market supply and demand for microfinance products in Laos.
Robert Feinholz: What is the top asset class indentified for retirementForman Bay LLC
The study found that lifetime income annuities can provide secure retirement income for 25-40% less than other traditional methods thanks to risk pooling. Income annuities address the risk of outliving one's savings by providing guaranteed lifetime income that cannot be replicated by other asset classes. Covering basic living expenses with income annuities provides greater flexibility to take more investment risk in other portions of one's portfolio. Recent innovations have increased the desirability of income annuities.
Milliman Paper - bespoke solutions is new blackandyshep
This document discusses retirement planning challenges in light of upcoming pension reforms in the UK. It identifies four key risks retirees face - longevity, inflation, lack of flexibility, and volatility. Existing retirement products may not adequately address these risks. The reforms shift responsibility and risk from the government to individuals. The document proposes a 'bucketing' framework to help advisers create customized retirement portfolios that blend products to better meet clients' financial and emotional needs by addressing the four risks.
A retirement plan is built on a set of assumptions that can't be validated until it's too late. One key to successful retirement planning is carefully setting assumptions and revising them often.
This document provides an overview of investing basics and different types of investments. It discusses the importance of saving, paying off debts, and having insurance as the foundation of investing. It also summarizes key concepts like risk tolerance, time horizon, liquidity needs, and how stocks and bonds work as investments. The document emphasizes diversification and having an appropriate strategy for each investor's unique financial goals and situation.
A self guide towards financial planning. We ourselves can manage our finances, so here comes phase-1 describing about few topics. Stay tuned for the remaining topics in phase-2.
1) The document discusses various aspects of personal financial planning such as insurance, emergency funding, retirement planning, and investment.
2) It emphasizes the importance of having health, life, and property insurance. It also stresses the need to have an emergency fund equivalent to at least 12 months of normal living expenses.
3) The document recommends starting retirement planning as early as possible through sustained systematic investment in well-diversified equity funds and the Public Provident Fund to accumulate enough for a comfortable retirement over 30 years or more after stopping work.
The Art of Managing Retirement AssumptionsForman Bay LLC
A retirement plan is built on a set of assumptions that can't be validated until it's too late. One key to successful retirement planning is carefully setting assumptions and revising them often.
The document discusses the importance of carefully setting retirement planning assumptions and revising them over time as new information becomes available. It notes that small differences in assumptions like rates of return or inflation can significantly impact retirement projections. It recommends collaborating with an advisor to set reasonable assumptions that account for an individual's specific situation and goals. Regularly revising assumptions is important to keep the retirement plan on track as circumstances change.
This document discusses the importance of carefully setting assumptions when planning for retirement. It notes that retirement projections rely on assumptions about retirement date, living expenses, inflation rates, investment returns, and life expectancy. Even small differences in assumptions can significantly impact projections. The document advises regularly revising assumptions as new information becomes available. It also recommends collaborating with an advisor who can help determine reasonable assumptions based on individual circumstances and revise plans accordingly over time.
The document discusses the importance of carefully setting retirement planning assumptions and revising them over time as circumstances change. It notes that small differences in assumptions like rates of return or inflation can significantly impact retirement projections. It recommends collaborating with an advisor to set reasonable assumptions that account for an individual's specific situation and goals. Regularly revising assumptions is key to keeping a retirement plan on track.
This document provides an overview of personal financial planning. Personal financial planning involves analyzing one's current financial position and predicting short and long-term needs. It includes planning for acquiring assets like investments and property, managing one's financial position, saving and investing, managing liabilities and insurance, tax planning, employee benefits, retirement, and estate planning. Saving and investment planning becomes more important as income increases to overcome inflation. Insurance can help manage risks like liability, death, health issues and long-term care, while also providing some tax benefits. Retirement planning determines how to fund expenses after work, while estate planning involves distributing assets after death typically through a will.
Most Canadians are doing reasonably well financially, with an average financial well-being score of 66 out of 100. Three quarters of Canadians scored above 50, indicating they are somewhat or securely financially. However, many Canadians struggle with financial resilience for the future and feeling financially comfortable, even if they can meet current commitments. Psychological factors like confidence and attitudes towards money are strongly related to financial well-being, more so than economic factors alone. Building buffers and preparing for financial setbacks could help improve Canadians' financial well-being.
Identifying the 12 things that EVERYONE gets wrong about financial planning, Understanding insurance, Demystifying savings and investments, Wading through the banking and lending challenges, Effective tax and estate planning
Professor Jamie Hopkins, co-director of The American College New York Life Center for Retirement Income, asked 12 leading financial planners and professors at The American College of Financial Services to give their tips for helping your clients secure an optimal financial outlook.
A document discusses accumulating funds in a deferred fixed interest and indexed annuity for retirement. It describes how annuities can be used to systematically save money and guarantee retirement income that cannot be outlived. It then provides details on sources of retirement income, obstacles to retirement planning, and how annuities can help overcome those obstacles by allowing tax-deferred growth and converting savings into guaranteed lifetime income.
Welcome to the fifth edition of Outline, Redington’s quarterly collection of thought-pieces designed to help institutional investors make smarter and more informed decisions.
This edition features short articles on the future of pensions policy, the complexities of running a pension scheme and how technology can help overcome them, risks inherent from gilt and swap rate differences, an outcome-driven approach to fund management, a review of asset classes in 2013, plus an overview of the global macro environment.
We hope you find the articles interesting and helpful as you consider how best to manage the risk-adjusted return of your portfolios
This document provides information about retirement planning and risks to consider when planning for retirement. It discusses the importance of having a retirement plan that incorporates predictable income, access to assets for flexibility, and growth opportunities. This allows the plan to address risks like longevity risk, inflation risk, health care costs, market risks, and excessive withdrawals. The document recommends a retirement strategy with three components: a predictable income stream, access to liquid assets, and growth potential. This can help retirees feel confident in their ability to cover living expenses and maintain their standard of living. Key considerations for the strategy include when income will be needed and how much, which depend on the individual's retirement horizon, needs, and risk tolerance.
This document discusses key factors in retirement planning, including increased life expectancy, inflation, declining pensions, and health care costs. It outlines 5 steps for retirement planning: 1) set goals, 2) estimate expenses, 3) determine resources, 4) estimate savings needed, and 5) make adjustments if savings are insufficient. The document emphasizes starting to save early, maximizing tax-deferred savings plans, diversifying investments, and seeking professional financial planning assistance.
Public pensions are on the verge of exploding municipal and the state budget in coming years.
Generational theft is a strong language, but Richard Dreyfus, Senior Fellow at the Commonwealth Foundation beleives that this looming timebomb" has the potential to bankrupt our cities and our state. He made complelling arguments and marshalled the facts to present a simple, compelling and thought provoking presentation.
The Allianz Center for Technology’s Risk Pulse report assesses the state of road safety worldwide and spells out the components of a culture of safety to reduce global accident risks.
Microinsurance - Demand and Market Prospects. A Three-Country Study: LaosOpen Knowledge
In 2006, Allianz AG, GTZ and UNDP teamed up in a public-private partnership to research the potential of a market-based mechanism to reduce poverty. This study analyzes market supply and demand for microfinance products in Laos.
Russia: Energy Policies and Carbon MarketsOpen Knowledge
The WWF'S Russia study concludes that the Kyoto protocol could help Russia move forward. It calls for a long-term energy strategy and a faster Kyoto process in Russia.
Space Risks: A new generation of challengesOpen Knowledge
Space debris poses serious risks to satellites through collisions. There are over 16,000 cataloged pieces of space debris larger than 10 cm orbiting Earth. Collisions between satellites and space debris can cause critical or catastrophic damage. The amount of space debris is increasing as objects collide, producing more fragments. Beyond collision risks, solar storms can also damage satellites by disrupting electronics with radiation. While risks exist, insurance helps support the space industry by covering satellites and launch vehicles.
China’s workforce is shrinking. The one-child policy is often blamed but it is doubtful whether fertility rates would jump if China abandoned it. There are greater forces at work, finds the latest Allianz Demographic Pulse.
When contemplating a comfortable retirement you’re better off being an Australian or a Swede than a Thai, an Indian or a Greek, according to the Allianz Global Investors’ 2011 Pension Sustainability Index that shows which pension systems are best prepared for the future.
It is predicted that age-related government expenditure for pensions, health and care will consume nearly 30% of Europe’s annual economic output by 2060.
Allianz Risk Pulse: The Future of Individual MobilityOpen Knowledge
The document discusses trends that are changing mobility, including rising environmental consciousness, urbanization, and digitalization. New mobility concepts like driverless cars and car sharing have the potential to revolutionize transportation. Regulations and consumer attitudes are also shifting, with people showing less interest in car ownership and more interest in sustainability. Technological innovations will further enable new mobility solutions and business models. The future of mobility is uncertain but will be defined by interconnected changes in technology, consumer behavior, and policy.
Recipe - Report on Energy and Climate Policy in EuropeOpen Knowledge
Ambitioius climate change mitigation targets are feasible at low cost - but only if decisive political and economic action is taken within the next ten years.
Allianz Demographic Pulse | Retirement | March 2013Open Knowledge
After a decade of pension reforms in Western Europe and the establishment of new systems in Eastern Europe and Asia, the structure of a retirement income has begun to change. This paper summarizes the
driving forces behind this transformation and describes the new mix of sources of retirement income of households in selected countries.
As a global financial services provider, Allianz's business success is heavily affected by a variety of global, long-term issues. In this Sustainability Factbook, Allianz presents their ongoing activities relating to the three global issues that are most relevant to the core business: access to finance, climate change and demographic change.
The Allianz Foundation for Sustainability has joined the climate debate with a comprehensive brochure on climate fundamentals, history and projections.
The document discusses upcoming changes to the Dutch pension system due to fiscal pressures and a low yield environment. The retirement entry age will increase to 67 in 2021 and be pegged to life expectancy going forward. Changes to tax advantages for pension savings will significantly lower accrual rates for occupational pensions. Current low yields have decreased pension fund funding levels, requiring emergency recovery plans that may include benefit cuts. The system is moving from a risk-based to a more regulated framework using an ultimate forward rate.
Allianz Life North America – Reclaiming the FutureOpen Knowledge
In a comprehensive survey of U.S baby boomers, coupled with in-depth interviews with financial professionals, Allianz reveals the boomers’ attitudes to retirement planning, their expectations and strategies, and identifies five distinct financial “personalities”.
Reduced sources of income, greater longevity, and market volatility together present a major challenge to the baby boomer generation’s hopes and expectations for a comfortable retirement with guaranteed income, and are forcing them to rethink retirement
In this white paper, Allianz assesses this generation’s response and reveals several key findings which do provide some cause for optimism, in particular the many options Americans have at their disposal to address the three key challenges the baby boomers face.
Allianz Life North America – Rethinking What’s Ahead in RetirementOpen Knowledge
In this analysis of the United States’ retirement landscape, Gary C. Bhojwani, chairman of Allianz Life Insurance Company of North America and member of the Board of Management, Allianz SE, Insurance USA, traces the evolution of retirement over the past 70 years and identifies a decisive shift in the financial mindset of all Americans from accumulation of assets to a focus on lifetime income and guarantees. Emphasizing that annuities are set to play a vital role, he highlights the opportunities presented by insured retirement solutions and suggests the demand for guaranteed lifetime income will only grow in coming years.
and financial markets. However, the
resilience of people and the strength of
The document provides an analysis of recent natural catastrophes communities often help minimize long-
around the world from 2010-2011. It discusses the severe earth- term damage. Rebuilding efforts can
quake and tsunami that struck Japan in March 2011, estimating the also boost economic activity. While the
insured losses could range from $12-60 billion. The increase in costs of responding to disasters are high,
catastrophes is likely due to greater exposure of property in high- insurance plays a crucial role in enabling
risk areas and climate change effects. Asia faces higher risks due reconstruction and recovery
Impact of the Euro debt crisis on the investment behavior of 50+ European Inv...Open Knowledge
This document discusses the results of a survey conducted in 7 European countries regarding how 50-70 year old investors have been impacted by and reacted to the Euro debt crisis. Some key findings:
- Italians and French reported the most negative personal financial impacts, while Germans and Swiss reported little impact.
- Over half of Italian respondents save less than before the crisis, while most others did not change savings.
- Main change in investments was reducing risk and choosing shorter-term investments, while UK investors did not largely change behavior.
- Germans, Austrians and Italians largely trust the Euro, while skepticism is highest in France, Netherlands, and UK.
- Majorities in all countries expect tax hikes and
In RiskMonitor, Allianz Global Investors (AllianzGI) together with Investment & Pensions Europe (IPE) magazine surveys European institutional investors’ perceptions of capital market, regulatory and governance risk.
This document discusses barriers that prevent many Americans from adequately preparing for retirement. It summarizes the key findings of a survey of nearly 4,500 consumers conducted by Deloitte's Center for Financial Services. The survey found that 58% of Americans do not have a formal retirement savings and income plan. It identified five main barriers: 1) conflicting financial priorities, 2) failure of financial institutions to effectively communicate, 3) lack of awareness of retirement products, 4) mistrust of financial institutions, and 5) consumers' preference to manage retirement planning themselves. The document suggests that financial institutions should address retirement needs earlier and in conjunction with other financial goals in order to help consumers overcome these barriers.
The document discusses how retirement planning relies on assumptions about rates of return, inflation, expenses, and life expectancy that are difficult to accurately predict and can significantly impact retirement outcomes if incorrect. It recommends carefully setting initial assumptions with an advisor and revising them over time as more information becomes available. Collaborating with an advisor allows combining their market expertise with a client's personal details to establish the most reasonable assumptions.
The passage discusses how Social Security is facing insolvency by 2036 unless reforms are made. It notes that even long-time defenders of Social Security like AARP now acknowledge cuts to benefits are inevitable. As a result, individuals will need to significantly increase personal savings to make up for reduced future Social Security income. The passage provides strategies for boosting savings, such as increasing income, reducing expenses, and reallocating assets.
20150921 PPI State Street myths and rules of thumb in retirement incomeSarah Luheshi
This document summarizes research on how "rules of thumb" could help individuals manage their defined contribution pension pots under the new UK pension flexibilities. It discusses two potential rules of thumb - the "4% rule" where individuals withdraw 4% of their pot annually adjusted for inflation, and securing a "basic income to meet essential needs." The research found that while received wisdom may be true for some, rules of thumb phrased in clear, easy to understand language could help guide retirement income decisions for many by addressing risks like drawing down pensions too quickly. Financial education is still needed to ensure rules of thumb benefit individuals.
Funding a 30-year retirement will take financial planning prowess as you
juggle the effects of inflation, distributions, taxes, asset allocation, and
expenditures. Are you up to the task?
The document discusses how increased choice in UK pension benefits has created behavioral complications for members. It examines potential behaviors people may exhibit given more freedom over how they access pension funds. While choice is welcomed, there is concern that too much could overwhelm people and reduce optimal outcomes. The key question is how much choice is dangerous and how can its effects be managed. The document suggests employers understand member behaviors to plan accordingly and provide support through engagement programs to help people make informed retirement decisions.
The document provides an introduction to retirement planning basics. It discusses why individuals need to take retirement planning into their own hands given uncertainties around social security and pension benefits. It also notes the need to plan for unforeseen medical expenses in retirement and potential estate planning goals. The document outlines key factors to consider when determining how much money is needed for retirement, including desired retirement age, expected annual income needs, current savings, expected investment returns, and any pension benefits.
The documentary presents a stark picture of the retirement crisis in America, with half of working employees lacking access to a company retirement plan, and of those that do, only a third contributing, and of that group only 11% saving enough. The program blames the shift from defined benefit pensions to defined contribution plans like 401(k)s, though workers always faced retirement risks. Employers need to better educate participants and ensure retirement plans fit needs to help address the crisis.
New "flip book" eMagazine is available for you right here. The value of insurance is front and center in this new publication which features an easy to use flip book feature. VantagePoint magazine is an independently produced quarterly publication that offers valuable information for mature adults (55+).
The document discusses retirement income solutions within 401(k) plans (in-plan) versus outside of plans (out-of-plan). It notes that only 25% of 401(k) participants achieve retirement success due to challenges in saving enough and converting savings to reliable income. In-plan solutions aim to help but face barriers like fiduciary concerns and lack of features. Recent regulatory guidance addressed some barriers like applying survivor annuity rules to deferred annuities and allowing longevity annuities in plans. Overall solutions are still missing features around portability, fee transparency, and survivor options.
This document discusses private retirement savings in the United States. It begins by outlining the current state of retirement savings, noting that about 20% of Americans do not save and that Social Security is projected to run out of funds. The document then defines key terms like retirement, retirement savings, private savings, and sufficient savings. It estimates that individuals will need around $500,000-$1,000,000 in savings to retire comfortably. The document analyzes factors like taxes, debt, and human behavior that influence private savings, and says the three main economic perspectives will be considered to evaluate solutions to increasing retirement savings.
1) The document outlines the steps for retirement planning which include identifying goals and expenses, inventorying assets and income sources, analyzing the likelihood of reaching goals, creating an action plan, and monitoring the plan.
2) It emphasizes prioritizing retirement objectives from most to least important and quantifying essential versus non-essential expenses.
3) Key retirement income sources like Social Security, pensions, and investments are discussed along with ensuring reliable income will cover minimum expenses and filling any gaps.
- Two new reports advise retirees to invest less in stocks and more in annuities, with one report recommending just 5-25% in stocks to minimize risk of running out of money.
- The GAO report also recommends annuities to avoid outliving savings, as well as delaying social security, working longer, investing wisely, and withdrawing no more than 3-6% annually in retirement.
- While annuities protect against outliving savings, experts say more education is needed to help people understand retirement savings needs and goals before focusing on products.
- Two new reports advise retirees to invest less in stocks and more in annuities, with one report recommending just 5-25% in stocks to minimize risk of running out of money.
- The GAO report also recommends annuities to avoid outliving savings, as well as delaying social security, working longer, investing wisely, and withdrawing no more than 3-6% annually in retirement.
- While annuities protect against outliving savings, experts say more education is needed to help people understand retirement savings needs and goals before focusing on products.
Running Head FINANCIAL LITERACY1FINANCIAL LITERACY10.docxwlynn1
Running Head: FINANCIAL LITERACY 1
FINANCIAL LITERACY 10
Financial Literacy
Professor’s Name
Student’s Name
Course Title
Date
Financial Literacy
Introduction
Any average investor of American origin usually makes financial decisions, specifically when it comes to retirement and saving. Some of the costly errors include the failure in making sure that there is receipt of the employer matching contribution towards your saving, inadequate saving, the payment of excess interest costs and excessive fees and the substandard diversification (Deuflhard et al., 2019). The evident prepondence portrays a picture of the general inadequacy of understanding for return, risk and diversification in the stock markets.
The financial literacy is the capability of understanding and correctly applying the financial management skills (Deuflhard et al., 2019). The act of managing debts properly, calculating interests properly, effective planning for finances as well as understanding the time value of money is what financial literacy entails.
The resulting poor financial behaviours and the financial knowledge low levels with the effect being seen in the troubled context of the pension’s disappearance and the improved personal responsibility in terms of the retirement plans well seen in the defined patterns of contribution plans is a good proof that financial literacy is becoming a common phenomenon. In the modern finance, there is a component of punishing financial ignorance and rewarding of the do it yourself component of necessitated by financial knowledge. The lack of regulation of the financial markets and the comparatively easy access to credit has increased further the appetite for financial knowledge (Calcagno et al., 2019). Most individuals are now responsible for making their own investment choices and could end erring in security selection and the asset allocation or even both.
Financial Literacy background information
Financial literacy refers to the ability to effectively and efficiently manage and evaluate your finances so that you make prudent decision geared towards attaining your life goals and achieve the financial well-being (Calcagno et al., 2019). When you are financially literate, you will protect yourself from being exploited either through questionable investments or identity fraud and this allows you to meet the everyday or basic needs.
How financial literacy affects your daily life
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3. Masthead
Publisher
Allianz SE
Koeniginstrasse 28
80802 Munich, Germany
Phone: +49 89 3800-0
Fax: +49 89 3800-3425
www.allianz.com
Author
Dr. Kathrin Nies, Economist Contents
International Pensions
kathrin.nies@allianzam.com
+49 89 12 20 70 03 Executive Summary: Retirement Planning Seems
to be Worth the Effort
Editor
Marilee Williams 04 Retirement Planning Results in Greater Wealth
Layout 05 Data and Descriptive Results
volk:art51 GmbH, Munich
06 Retirement-planning satisfaction according
Closing Date to socio-economic characteristics
20.03.2012
09 Retirement-planning satisfaction according
to savings-related characteristics
These assessments are, as always, subject to the 12 Marginal Impacts on Retirement Planning Satisfaction
disclaimer provided below.
15 Conclusion
Cautionary Note Regarding Forward-Looking Statements
The statements contained herein may include statements 16 References
of future expectations and other forward-looking statements that
are based on management’s current views and assumptions and
involve known and unknown risks and uncertainties that could
17 Recent Publications
cause actual results, performance or events to differ materially
from those expressed or implied in such statements. In addition
to statements which are forward-looking by reason of context,
the words “may”, “will”, “should”, “expects”, “plans”, “intends”,
“anticipates”, “believes”, “estimates”, “predicts”, “potential”,
or “continue” and similar expressions identify forward-looking
statements. Actual results, performance or events may differ
materially from those in such statements due to, without
limitation, (i) general economic conditions, including in particular
economic conditions in the Allianz Group’s core business and core
markets, (ii) performance of financial markets, including emerging
markets, and including market volatility, liquidity and credit events
(iii) the frequency and severity of insured loss events, including
from natural catastrophes and including the development of loss
expenses, (iv) mortality and morbidity levels and trends, (v)
persistency levels, (vi) the extent of credit defaults, (vii) interest
rate levels, (viii) currency exchange rates including the Euro/U.S.
Dollar exchange rate, (ix) changing levels of competition, (x)
changes in laws and regulations, including monetary convergence
and the European Monetary Union, (xi) changes in the policies
of central banks and / or foreign governments, (xii) the impact
of acquisitions, including related integration issues, (xiii)
reorganization measures, and (xiv) general competitive factors,
in each case on a local, regional, national and / or global basis.
Many of these factors may be more likely to occur, or more pro-
nounced, as a result of terrorist activities and their consequences.
The company assumes no obligation to update any forward-
looking statement.
No duty to update
The company assumes no obligation to update any information
contained herein.
2
4. Allianz International Pension Papers No. 2|2012
Executive Summary:
Retirement Planning Seems
to be Worth the Effort
The first baby boomers are now retiring in the United States. Most of them 1 Allianz Global Investors, 2011: Demography
will not be able to live on social security alone. Average earners in the United Series 1-3
States receive about half of their annual lifetime income as a public pension.
Therefore, they are heavily dependent on their private retirement savings.
Due to demographic changes, future generations are likely to face even lower
retirement income from public pensions and will therefore depend more on
private retirement income.1 Consequently, they can now learn from the saving
experiences of the retiring baby-boomer generation.
Previous research has found that people who do some kind of retirement plan-
ning accumulate more wealth than those who do not. Furthermore, planners
who make the effort of calculating their future needs and resulting required
savings rate, and planners who use rules of thumb statistically end up with the
same amount of wealth. Looking at a dataset from retired affluent Americans
who are between 50 and 69 years old, we investigate which type of saver, regular
and/or irregular, is most satisfied with his retirement planning. Our regression
analysis suggests that people who save regularly for retirement are significantly
happier with their retirement planning than those who do not, else equal. A word
of caution: We do not look at people older than 69 who have been living on their
savings a little bit longer and may have a different view.
3
5. Retirement Planning Results
in Greater Wealth
2 Allianz Global Investors, 2011: Putting the When asked in hindsight, many retirees believe they made mistakes in their
Retirement Pieces together: Strategies of the retirement planning. The most often-quoted reason for this is that they started
affluent 50+ Generation in the United States,
International Pension Papers 01/2011 to save too late and invested too riskily.2 The natural follow-up question is:
How can this be avoided? Annamaria Lusardi and Olivia S. Mitchell analyzed the
relationship between retirement planning and total net worth in the United States
and found that households reporting to have done some retirement planning are
already much better off in terms of their net worth than equivalent households
reporting to have done hardly any planning. Furthermore, they found that political
and financial literacy positively affects the probability of planning for retirement.
Based on US citizens, Johannes Binswanger and Katherine G. Carman extended
this analysis. They distinguished three retirement planning types:
• An actual planner: one who tries to calculate how much is needed
in retirement, possibly based on a few future scenarios;
• A rule-of-thumb planner: one who regularly saves an absolute amount
or a percentage of income; and
• Someone who does not have a savings rule.
Of course, the first type of planner requires much more time and effort for his
planning than the second; the last needs the least amount of time and effort.
In their analysis, Binswanger and Carman succeeded in not only showing that the
first two types, the actual and rule-of-thumb planners, accumulate significantly
more retirement wealth than the third type without a savings rule. In addition,
there seems to be little difference between the retirement wealth of an actual
planner and a rule-of-thumb planner. This implies that saving for retirement does
not have to be so expensive (i.e., actual planning); instead, using rules of thumb
statistically lead to the same outcomes.
It is unclear, however, whether a person A who accumulates, say, 100 units of
retirement wealth has saved ‘better’ than a person B with 80 units of retirement
wealth. Person A may have invested less in children’s education, which may
not be optimal. Maximizing retirement wealth therefore does not necessarily
maximize happiness. A complement to the retirement wealth analysis is, then,
the analysis of satisfaction with retirement planning. It gives us a hint at whether
people were able to spread their savings over their life course and are content
with their retirement wealth now. In line with the life-cycle theory and assuming
that people are forward-looking rational agents, it implies that a person manages
to smooth his consumption and savings path over the life course, which makes
him happy. In practice, people are often not forward-looking and may not realize
that they may outlive their assets if they live “too” long. Bearing this fallacy in
mind, we investigate which factors increase retirement-planning satisfaction,
using a relatively young sample of retirees.
4
6. Allianz International Pension Papers No. 2|2012
Data and Descriptive Results
On average, retirees are more satisfied with their retirement planning than people
who are still working or who are part-time retired, 1.59 versus 1.93 and 1.87,
respectively. Workers’ and part-time retirees’ satisfaction with retirement planning
is statistically indistinguishable. There are two immediate reasons for the higher
satisfaction of retirees versus non-retirees, the first being uncertainty. These non-
retirees are not sure whether their accumulated savings will last them through
retirement in the manner they are expecting. As people are typically risk averse,
they may perceive their situation to be worse under uncertainty than under cer-
tainty. Reason number two may be self-selection. Only those people who achieve
a certain planning satisfaction will decide to retire; otherwise, they continue
working (and saving) until they believe they have enough. Our aim is to find the
factors that help to increase retirement-planning satisfaction in order to give
today’s workers some practical guidance about what to do today to be satisfied
during retirement tomorrow. We therefore focus on the retirees in our sample
who can look back at their savings rules and judge their level of satisfaction with
their retirement planning up to their current age.
5
7. Retirement-planning satisfaction
according to socio-economic
characteristics
Table 1 describes this subsample of 580 retirees according to their level of
education and accumulated wealth. It gives us a first indication of which factors
positively affect retirement-planning satisfaction. Satisfaction is measured on
a scale from 1 (very satisfied) to 5 (very dissatisfied).
The better people are educated, the larger their human capital because they can
take more challenging and responsible jobs in the labor market. Consequently,
they have a higher earnings potential. Among the retirees who are beyond their
earnings phase, it gives us a hint of how much they have earned while in the labor
force. The standard life-cycle theory tells us that we should save relative to our
income. People earning less should save less than people who earn more. This is
because the higher earners also consume more and will still do so in retirement.
Especially for this affluent group of people, where everyone should have no
difficulties satisfying basic needs, this should hold true. Consequently, if we treat
education as a proxy for income, there is no reason why retirement-planning
satisfaction should vary across education categories. However, if looking at
education for what it is – an indicator for how much we have learned – we can
expect more-educated individuals to make smarter choices. Whether smarter
choices also result in higher satisfaction with retirement planning is an empirical
Box 1: Description of the dataset
We use a US dataset of 1,506 affluent (more than $ 250,000 in investable assets) individuals who are older than 50.
The survey was conducted in 2010 by Allianz Global Investors AG and TNS Infratest. We know the following socio-
economic characteristics: age, education, employment status (working, retired, part-time retired) and net worth.
Age is recorded in categories 1 (50 – 54) to 4 (65 – 69). Originally, there were 10 education categories, but we recoded
them into categories of the International Standard of Classification for Education (ISCED). Net worth is asked on
a household level and also recorded in categories. We do not know their health status. Furthermore, people indicate
whether they save regularly, irregularly or do not have a savings rule at all, and whether they believe they made errors
in saving for retirement (yes / no). Given their answers to a knowledge question about inflation and annuities, we
can check how financially literate they are. They also indicate how satisfied they are with their retirement planning
on a scale from 1 (very satisfied) to 5 (very dissatisfied).
6
8. Allianz International Pension Papers No. 2|2012
question. Ignoring the small percentage of people in the “middle education”
category, we observe increasing satisfaction levels with education, though only
the highest group is significantly more satisfied than the other ones.
Table 1 also shows that our sample is quite wealthy, with only 3 % of the retirees
having less than $ 250,000 in net worth. For this relatively rich group of people,
private wealth is very important in retirement because their replacement rates
from state pensions are comparatively low. In order to maintain their standard
of living, they have to save a lot on top of the state provision. The satisfaction with
retirement planning generally improves across the wealth categories, although
Table 1: Satisfaction with retirement planning depending on education and wealth
Mean satisfaction Percentage in sample
Education
Middle Education 1.50 > 0 %
Secondary School 1.72 5 %
Vocational Certificate 1.66 54 %
Bachelor / Master 1.54 36 %
Doctorate 1.19 5 %
Wealth
< $ 250,000 2.05 3 %
[$ 250,000; $ 500,000) 1.96 10 %
[$ 500,000; $ 750,000) 1.79 16 %
[$ 750,000; $ 1,000,000) 1.49 17 %
[$ 1,000,000; $ 1,500,000) 1.60 19 %
[$ 1,500,000; $ 2,000,000) 1.50 13 %
[$ 2,000,000; $ 3,000,000) 1.29 10 %
[$ 3,000,000; $ 4,000,000) 1.45 6 %
> $ 4,000,000 1.44 6 %
Source: own calculations
7
9. less clearly across the largest categories. This is in line with our expectations.
A person who has done some retirement planning can allocate his resources
more efficiently, accumulate more wealth and be satisfied with it. Once a certain
wealth level is crossed, however, one unit of additional income does not make
such a big difference anymore. Imagine a frequently unemployed person who
has hardly any wealth – say 100 units – and a permanently employed person
who owns about 1,000 units. If you give 50 extra units both to the frequently
unemployed and the permanently employed person, the former is going to be
happier with the increase than the permanently employed person would be.
Given our sample selection, all individuals in the sample belong to the affluent
group and the effect of an additional unit of wealth should be comparatively low.
8
10. Allianz International Pension Papers No. 2|2012
Retirement planning satisfaction
according to savings-related
characteristics
3 1
1 –
(1 + i / n)nE(y)
P = 1000
Table 2 indicates that 56 % of the people in this sample of retirees are very satisfied i /n
with their retirement planning. It does not come as a surprise to see more people where i is the real interest rate, n the number of
believe they have made mistakes in their retirement planning among the dis- payments per year(12) and E(y) the expected
number of years the payment will be paid out.
satisfied people than among the satisfied people. This percentage monotonically
4 OECD (2011)
increases from the very satisfied to the very dissatisfied. Subjective impressions
are thus in line.
The survey also included two knowledge questions about inflation and annuities.
First, people were asked to indicate how much a life-long annuity that pays $ 1,000
as of age 65 would cost: $ 65,000, $ 115,000, $ 165,000, $ 215,000 or $ 265,000.
They could also say they did not know. The formula to calculate an annuity is quite
complicated and depends on several parameters whose values are not given.3
Assuming a real interest rate of 2.5 % and a life expectancy of 16.8 4 at age 65, the
annuity costs $ 164,480. Thus, option three is correct. Secondly, people were asked
to indicate how much $ 1,000 would be worth in real terms in 20 years, assuming
2 % inflation: $ 1,000, $ 980, $ 820, $ 670 or $ 550. They could also indicate that they
did not know. The correct answer is $ 1,000 x (1–0.02)20 = $ 667.61, thus option 4.
The inflation question is much easier to answer than the annuity question because
it only depends on three given parameters and a relatively easy formula. One can
Table 2: Satisfied with retirement planning and believe to have made errors in planning
Satisfaction with retirement planning
Very satisfied 31 % 58 % 56 %
Somewhat satisfied 52 % 34 % 34 %
Neither satisfied nor dissatisfied 65 % 11 % 5 %
Somewhat dissatisfied 76 % 17 % 4 %
Very dissatisfied 100 % 0 % 1 %
Source: own calculations
9
11. 5 Allianz Global Investors, 2011: Putting the argue about the necessity to be able to calculate the price of an annuity or the
Retirement Pieces together: Strategies of the price of inflation accurately for financial decision making. It may be sufficient to
affluent 50+ Generation in the United States.
International Pension Papers 01/2011 be aware of the influencing factors and their dynamics in order to make smart
financial decisions. Also, not everyone may have had a calculator at hand.
In the upper half of Table 3, we distinguish the retirement-planning satisfaction
of people who answered both questions correctly, who answered the annuity
question correctly, who answered the inflation question correctly and who did
not answer any correctly.
Table 3: Satisfaction with retirement planning depending on financial knowledge and savings behavior
Mean Satisfaction Percentage in Sample
Correct knowledge questions
Among them:
don’t know
0 1.56 68 %
0 1.53 40 %
1 1.59 29 %
2 1.57 31 %
1 (inflation) 1.71 21 %
1 (annuity) 1.63 8 %
2 1.60 3 %
Savings behavior
regular and irregular 1.44 28 %
regular but not irregular 1.63 40 %
irregular but not regular 1.74 13 %
no savings rule 1.66 19 %
Source: own calculations
10
12. Allianz International Pension Papers No. 2|2012
Interestingly, people without any correct answers feel best prepared; and these
are 68 % of the people. They can be split up into those who do not have a correct
answer because they admit they do not know (40 % of the 68 %) and those who
falsely thought they knew (60 % of the 68 %). However, there is no statistical
difference between these subgroups with respect to the degree of satisfaction
with retirement planning. The rest is as expected; among those who do know
something, those who answered both knowledge questions correctly feel best,
followed by those who answered the annuity question correctly and those
who got the inflation question right. Only the difference in retirement-planning
satisfaction between the people with zero correct answers and those with only
the correct inflation answer is statistically significant (at a 10 % significance level).
The results seem to suggest that it is good to either not be able to answer the
financial knowledge questions at all or to be able to answer them perfectly.
However, given the peculiarities of the questions, we should not over-emphasize
the descriptive results.
We can distinguish three saving types: a regular saver, an irregular saver and
someone for whom neither applies. Regular saving can imply putting a certain
dollar amount or a certain fraction of income aside at regular intervals. Regular
and irregular saving are not mutually exclusive. A person can save regularly as
well as irregularly. The bottom half of Table 3 summarizes the satisfaction with
retirement planning depending on people’s savings behavior. Most of the people
save regularly, but not irregularly. This is followed by those who save regularly
as well as irregularly and those that do not have a savings rule. The fewest people
save only irregularly. There is a positive order of satisfaction from saving regularly
and irregularly to irregularly, but not regularly, where the former seem to be
doing best in terms of retirement-planning satisfaction. This regularity is inter-
rupted by those who do not have a savings rule. Only the regular and irregular
savings type’s retirement-planning satisfaction is statistically different from that
of the others (at a 1 % significance level). People who do not have any savings
rule may simply be people who do not care.5
The following regression analysis will tell us whether the separate bivariate
relationships still hold once we correct for all variables.
11
13. Marginal Impacts on
Retirement Planning Satisfaction
We estimate the marginal effects of the factors presented above on satisfaction
with retirement planning. This allows us to understand how important each of
these factors is for retirement planning, while controlling for the other effects.
The regression specification can be found in Box 2.
Table 4 below summarizes the regression results. All variables together explain
about 10 % of the variation in satisfaction with retirement planning and are jointly
significant in determining the level of satisfaction (log-likelihood ratio = 125.01).
Among the socio-demographic characteristics, the age category, gender and
being married do not have a significant impact on satisfaction with retirement
planning (not shown in table); individuals with a doctorate have a 27 % higher
chance of ending up very satisfied with their retirement planning compared to
the reference group of people with secondary education. The low t-ratios indicate
that the effect of the knowledge-related questions is statistically not distinguish-
able from zero. Previous studies around retirement planning found financial
literacy to be an important determinant for wealth accumulation and savings
behavior (cf. Annamaria Lusardi and Olivia S. Mitchell). This discrepancy leads us
to the suspicion that the knowledge questions asked are too specific to capture
an individual’s degree of financial intuition or knowledge.
Box 2: Regression specification
We run an ordered probit regression of retirement planning satisfaction on:
• a constant
• age categories (1 to 4)
• a dummy that equals 1 in case of females
• a dummy that equals 1 in case a person is married
• education dummies ISCED categories 4 to 6
• the natural logarithm of net worth within the household. We use the natural logarithm in order to account
for the decreasing impact of wealth on satisfaction as the wealth level increases.
• a dummy that equals 1 in case a person did his retirement planning without any advisor to control for a possible
systematic difference between people who take and who do not take advice.
• a dummy that equals 1 in case a person believes to have made mistakes in his retirement planning
• the number of correct answers to the knowledge questions
• the number of ‘do not know’ to the knowledge questions
• a dummy that equals 1 in case a person saves regularly and irregularly
• a dummy that equals 1 in case a person saves regularly, but not irregularly
• a dummy that equals 1 in case a person saves irregularly, but not regularly
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14. Allianz International Pension Papers No. 2|2012
As expected, the net worth affects satisfaction with retirement planning positively.
Here, a 10 % increase in wealth leads to a 0.009 (approximately 0.9 %) increase in
chance of being very satisfied with retirement planning. If we have two almost
identical individuals, the only difference being that one owns the median amount
of net worth ($ 1,250,000) and the other one about $ 125,000 more, the more
affluent one has a 0.9 % higher chance of being very satisfied with his retirement
planning than the other one. Though not very large, this positive impact is the
second-most significant effect in our regression. Thus, even in this relatively
selective sample, there is positive wealth effect.
Our regression results indicate that people who save regularly as well as irregularly
have a 16 % higher chance of being very satisfied with their retirement planning.
Table 4: Marginal effects from ordered probit regression
Variable Marginal effect T-ratio
Education: Vocational certificate (isced = 4) – 0.077 – 0.97
Education: Bachelors / Masters (isced = 5) – 0.028 – 0.33
Education: Doctorate (isced = 6) 0.269 2.09
Nr of correct answers (knowledge) – 0.025 – 1.05
Don’t know answer (knowledge) 0.005 0.22
Saving regularly and irregularly 0.159 3.05
Saving regularly but not irregularly 0.084 1.75
Saving irregularly but not regularly – 0.033 – 0.54
Believe to have made mistakes (subjective) – 0.284 – 9.44
others
N = 580; pseudo R2 = 0.107
Note: The table contains the marginal effects, i.e., the probability of being very satisfied with retirement planning due to each variable holding the other
variables constant as well as the respective t-ratios. The latter indicates the degree of certainty that the marginal effect is not zero (if larger than 2.56, 1 %;
1.96, 5 %; and 1.64, 10 %). It is computed using the Delta Method. Note that the ISCED comparison group is ‘middle and secondary’ education and the savings
type comparison group is ‘no savings rule’.
Source: own calculations
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15. For those who save regularly, but not irregularly, that probability amounts to about
8 %. Someone, however, who saves only irregularly is not more satisfied than some-
one without a savings rule. The latter provides the reference group. Contrary to
the first descriptive results, the type without a savings rule feels worse about his
retirement preparation once we isolate the effect from the others. Since only the
saver types that include regular savings are significantly positive, it seems essential
to save regularly in order to be satisfied with one’s retirement planning ex post.
This leads to a higher success in planning satisfaction than saving irregularly.
Lastly, we find a statistically significant effect from people believing they have
made mistakes in planning. Someone who believes to have made mistakes in
his retirement planning is 29 % less likely to be very satisfied with his retirement
preparation. It is the largest marginal effect of all variables.
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16. Allianz International Pension Papers No. 2|2012
Conclusion
The baby-boomers who are now retiring in the United States are one of the first
groups of people who – next to public pension income – depend on their private
savings. Many of them believe they have made mistakes. Since future generations
will depend even more on private savings, it is helpful to analyze which kind of
retiree is now content with his retirement planning ex post.
We built on research from Lusardi and Mitchell, and Binswanger and Carman.
The first authors demonstrated that retirement planning substantially increases
retirement wealth, while the second showed that rule-of-thumb planning and
serious retirement planning (the latter being much more costly) lead to statisti-
cally indistinguishable outcomes in terms of net wealth.
Since it is not necessarily best to maximize retirement wealth, we look at how
content retirees are with their retirement planning ex post. Our sample of retirees
is comparatively rich and young. But even among this group of people, we find
a significant effect of net worth and saving type on the satisfaction with retire-
ment planning. A 10 % increase in net worth leads to an almost 0.9 % increase
in the probability of being very satisfied with retirement planning. Among the
distinguished savings types, only regular, regular and irregular, only irregular and
no savings rule, we find significant differences. While the bivariate descriptive
results imply that the no-savings rule type as similarly content as the other types,
the regression results are able to isolate the effects, clearly showing that this
type does feel worse than the regular saving types. The largest effect here is an
approximate 16 % increase in the chance of being very satisfied with retirement
planning of the regular and irregular savers in comparison to the no-saving rules
type. “Only” saving regularly, but not irregularly, increases this chance by 8 %.
Therefore, it seems to pay off to save regularly if you want to be satisfied with
your retirement planning as a retiree.
15 15
17. References
Allianz Global Investors, 2011: Demographic Turning Point (1). Analysis and Trends
Allianz Global Investors, 2011: Pension Systems in a Demographic Transition (2). Analysis and Trends
Allianz Global Investors, 2011: Putting the Retirement Pieces Together: Strategies of the affluent 50+ Generation
in the United States. International Pension Papers 01/2011
Allianz Global Investors, 2011: The Global Pension Atlas 2011, Project M Publication
Allianz Global Investors, 2011: Paradigm Lost. Project M, 7
Binswanger, Johannes and Carman, Katherine G., 2009: How real people make long-term decisions:
The case of retirement preparation, Center Discussion Paper No 2009-72
Lusardi, Annamaria and Mitchell, Oliva S., 2007: Baby-boomer retirement security: The roles of planning,
financial literacy, and housing wealth. Journal of Monetary Economics, 54
OECD, 2011: Pensions at a Glance 2011: Retirement Income Systems in OECD and G20 Countries
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