Grandmother considers what she may be able to do to feel confident about her options to spend her savings over retirement.

People are living 40% longer in retirement. Lifetime income may be the next great frontier of retirement security.

The average person turning age 65 today in the United States can expect to live 40% longer than someone who entered their senior citizen years in 1950.1 As Americans live longer and spend more years in retirement, most underestimate how long they’ll live. This uncertainty, combined with other variables, can make it difficult to plan asset spending in retirement. Research shows some retirees are running out of money too soon, while others are spending far less than they’ve accumulated.2

A new white paper by The Longevity Project, featuring insights from Principal Financial Group®, discusses the implications of longer lifespans on retirement spending. Download the white paper (PDF) to explore how plan sponsors, financial professionals, and policymakers can work together to make retirees’ finances more predictable through guaranteed lifetime income. This may be the next great frontier of retirement security.

Key takeaways

People crave certainty, and volatile equity markets can add stress and make the courageous nauseous. Guaranteed income may provide satisfaction to retirees, help them with the confidence to stay invested for the long haul, or help drive better retirement outcomes, regardless of market performance.”

Sri Reddy, senior vice president of Retirement & Income Solutions, Principal Financial Group®

Illustration of how each gender underestimates their life expectancy from the Standford Center of Longevity

For plan sponsors

  • In times of volatility, employees are increasingly interested in guaranteed income solutions that can help them feel confident and secure in their finances.
  • The Setting Every Community Up for Retirement Enhancement (SECURE) Act made three major advances that opened the door for more business owners to offer their employees a guaranteed stream of income in retirement.
  • Due to the recent regulatory changes, now may be the time for plan sponsors who have been reluctant to adopt lifetime income solutions because of fiduciary responsibility, complexity, or other hurdles to revisit the option.

For financial professionals

  • Product innovations such as auto-enrollment and auto-escalation, and the growth of target date funds, have motivated many Americans to save more. But at retirement, many find themselves in a financial world with fewer guardrails and a wide variety of complicated financial decisions--underscoring the importance of financial professionals.
  • Guaranteed income may boost retiree confidence and satisfaction—and increase their likelihood to remain invested in the long-term.
  • There are many kinds of annuities, but many people don’t know the difference. Considerations when looking at annuities include the type of annuity, how it works, risks, fees and expenses, riders, the time horizon to retirement, and how an annuity may fit into an overall retirement savings strategy. Expanding the role of guaranteed lifetime income will require a concerted effort to educate customers.

For policymakers

  • The number of Americans retiring every day has more than doubled over the last 20 years,3 a statistic that illustrates the urgency of adopting stronger retirement legislation.
  • The SECURE Act was a major step to promote adoption of in-plan annuities and lifetime income projections, but more must be done.
  • The 117th United States Congress, which meets beginning in January 2021, should consider whether to strengthen the safe harbor provisions for plan sponsors offering annuities, and continue to support the development of lifetime guaranteed income as a central feature of the American retirement system, according to sources including Steve Vernon, a consulting research scholar at the Stanford Center on Longevity.

Next steps

Want more insight into the next frontier of retirement security? Download the full white paper (PDF) to learn more.

Guarantees are based on the claims paying ability of the issuing insurance company.

1 CDC, National Center for Health Statistics, Health, United States, 2018, “Life expectancy at birth, at age 65, and at age 75, by sex, race, and Hispanic origin: United States, selected years 1900–2017” 

2 Stanford Center on Longevity

3 U.S. Census Bureau / Deutsche Bank 

Guarantees are based on the claims paying ability of the issuing insurance company.

This is not a recommendation and is not intended to be taken as a recommendation. This material was prepared for general distribution and is not directed to a specific individual.

Annuity products and services are offered through Principal Life Insurance Company, a member company of Principal, Des Moines, Iowa 50392.

©2020 Principal Financial Services, Inc. Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.