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5500 Preparer's Manual for 2012 Plan Years

5500 Preparer's Manual for 2012 Plan Years
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CCH® BENEFITS — 05/5/11

Majority Of Seniors Fear Public Policy Will Derail Their Retirement Plans

from Spencer’s Benefits Reports: More than half of retirees ages 55 to 79 fear that changes to the Medicare and Social Security programs, as well as increases in taxes, will affect their ability to afford retirement, according to new LIMRA research presented at the 2011 Retirement Industry Conference.

“These concerns, as well as inflation, are top of mind for all retirees but especially true for those with the lowest incomes and assets, who can least absorb additional unexpected costs during retirement,” said Marie Rice, corporate vice president, LIMRA Retirement Research. “With so many lawmakers talking about cutting costs to reduce the growing deficit and the financial implications resulting from it, retirees who might have felt secure that their retirement savings would last their lifetime, now recognize the uncertainty of the times and how vulnerable they are.”

The study examined retirees’ income sources and how that income is spent. As expected, more than 85% rely on Social Security, and three quarters benefit from a traditional pension plan for their income. Forty-four percent of retirees listed investments and taxable savings as an income source; 35% an annuity (eight out of ten have a deferred annuity); and about a fourth mention employee earnings, defined contribution plans and IRAs funding their retirement income. More than half of their income is used to pay for basic living expenses.

“A significant change in public policy like Social Security and Medicare benefits could be disastrous for many retirees—particularly those with lower income and asset levels,” noted Ms. Rice. “For future retirees who will likely not have a pension plan to rely on, it will be important that they increase their current savings patterns and think about retirement income solutions including guarantee investments that will adjust for inflation. Our industry is uniquely qualified to provide solutions to protect retirees and help them achieve their financial goals.”

The study also found that fewer than half of retirees worked with a paid professional advisor to make investment decisions, and only 22% had a formal written plan. Prior LIMRA research has discovered that retirees who have a formal written plan are far more confident in their financial well being than those who do not.

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For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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