The FIDx Five: First Edition

Retirement, Annuity, and Fintech Insights

In this week's edition, we're sharing insights about how Covid impacted personal savings, concerns savers have about maintaining a standard of living as inflation drives prices up, and a quick look at annuity sales in the first quarter.

Retirement Expenses
Fidelity estimates a 65-year-old couple retiring this year will spend $315,000 on health care and medical costs throughout their retirement, which is up 5% from its estimate last year. This is in stark contrast to what Americans think they will spend. According to the study, couples retiring this year estimate they will spend $41,000 on health care expenses in retirement. This estimate is $274,000 short of Fidelity’s findings. (Source: Gregg Greenburg, May 16th,2022, Fidelity study shows retirees way off on health care cost estimates, Link)

Q1 Annuity Sales
First-quarter annuity sales increased 4% to $61 billion. Fixed-index annuities increased 21% from last year, and fixed-rate annuities increased by 10% from the previous year. The spike in sales is attributed to high market volatility and rising interest rates. Variable annuities, however, fell 5% from the previous year. (Source: Cyril Tuohy, May 4th, 2022, Big Shift in Annuity Sales Reflects Flight to Safety Amid Turmoil, Link)

Covid-19 & Savings
Covid-19 and its ongoing economic effects have been detrimental to American savings over the past year. According to Northwestern Mutual’s recent 2022 Planning and Progress Study, the average amount of personal savings dropped 15% from $73,100 in 2021 to $62,086 in 2022. (Source: Nicolas Vega, May 21st, 2022, Americans now have an average of $9,000 less in savings than they did last year, Link)

American Retirement Consensus
According to the Schroders 2022 U.S. Retirement Survey, working Americans say on average it will take $1,100,000 in savings to retire comfortably. 56% say they expect to have less than $500,000 saved, and 36% say they will have less than $250,000 saved. Only 24% say they will reach $1,000,000 in retirement savings. The low savings expectations of Americans on the brink of retirement can be attributed in part to the lack of future planning. Only 26% of working Americans nearing retirement say they have enough money to retire. (Source: Jennifer Manser, May 24th, 2022, Working Americans Say It Will Take $1,100,000 Saved to Retire Comfortably but Less Than One-Quarter Will Get There, Link)

Inflation Concerns
The inflation rate is currently over 8% - a 40-year high. Couple this with the stock market seeing a double-digit drop since the start of 2022, and you have an increasing number of concerned Americans. According to a survey conducted by the Nationwide Retirement Institute, about 1 in every 8 Gen Xers and Baby Boomers say they’ve postponed or considered postponing retirement due to the rise in inflation and drop in the stock market. (Source: Kate Ashford, May 17th, 2022, What rising prices could mean for your retirement plans (analysis), Link)

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