Two new, but separate, studies by Vanguard and Merrill Lynch revealed evolving trends among retirees. Neither study shatters commonly held beliefs, but both do show that some differences between perception and reality exist.
The Vanguard study, “Retirement Income Among Wealthier Retirees,” looked to see how sources of retirement income have changed. The firm surveyed more than 2,600 households ages 60 to 79 with financial assets of at least $100,000. The researchers requested a complete inventory of income sources and wealth holdings and then asked about the amount and movement of withdrawals.
Lending support to current perceptions, 85% of survey participants received Social Security and 71% received pension income. These public and private income sources accounted for nearly half of aggregate non-housing wealth. Ownership of retirement accounts (e.g., 401(k) plans, IRAs, etc.) was also high, with 84% of respondents holding at least once such type of account.
Where things get interesting is the composition of non-housing wealth. Among the six groups that Vanguard segmented respondents into, Social Security recipients and pensioners received about 70% of their non-housing wealth from the two traditional retirement income sources. Among the other six groups, however, the proportion of total wealth from Social Security and pensions ranged between 18% (for business Investors, who were the most reliant on business income) and 32% for annuity investors (who were the most dependent on annuity income). Even those who are the most dependent on income from stocks, bonds, funds and similar investments—retirement investors and taxable investors—still depended on Social Security and pensions for about a quarter of their total non-housing wealth. In other words, while many retirees are not solely living off of Social Security and pension payments, the two sources still account for a significant portion of wealth and income for most retirees.