In addition, continued volatility of investment returns in the equity markets creates significant "sequence of returns" risk, or the challenge of making up for lost returns after a significant market downturn, particularly just before or just after retirement. These challenges, the paper notes, are compounded by the fact that people are living longer, which further increases the chance of depleting retirement savings.
"While the majority of Americans insure their most valuable assets in order to safeguard against significant financial loss, many don’t think to insure their ability to generate lifetime income," says Bob O’Donnell, president of Prudential Annuities. "Today’s guaranteed income products were designed to help protect retirees from running out of income in retirement, regardless of market conditions or increased longevity."
The paper includes research provided by Ernst & Young’s Insurance and Actuarial Advisory Services practice and discusses the likelihood of the average retiree exhausting his or her retirement savings based on a number of scenarios, including a sustained low interest rate environment and continued market volatility.
Want to learn more about the paper’s findings? Read "Should Americans Be Insuring Their Retirement Income?" Want to talk to someone about the paper? Email Lisa Bennett.