Study: Overabundance of Cash May Cause Retirement Income Shortfall


Cash may be king, but ThinkAdvisor reported that a BlackRock’s latest Global Investor Pulse survey finds that Americans may be holding too much cash in their retirement accounts.

The survey found that Americans are holding 65% of their net worth in cash instruments.

What are the implications of this? According to the survey, baby boomers between the ages 55 to 65 said they want to have $45,500 in annual retirement income, but the nest eggs they have accumulated ($136,200 in average retirement savings) could provide $9,129 of estimated annual retirement income, leaving a potential annual gap of $36,371, according to the BlackRock CoRI Index 2025.

In order to overcome this retirement income shortfall, investors will need to adjust their asset allocation to higher-return-generating assets and away from cash.

The current asset allocation of the respondents to the survey is:

  • 65% cash
  • 18% equities
  • 6% bonds
  • 4% property
  • 2% alternatives
  • 5% listed as “other”

In contrast, AAII’s Asset Allocation Survey results for September 2015 shows that AAII members’ portfolios are currently allocated in this manner:

  • 64% equities
  • 16% bonds
  • 20% cash

In the recent AAII article, “Mathematical Support for Rising Equity Glide Paths,” author Luke Delorme cites research indicating that starting retirement with a low allocation to equities and allowing that exposure to increase over time could reduce risk and improve performance.

If you are not an AAII member but want unlimited access to AAII’s library of educational articles and its Asset Allocation Models, simply take a risk-free 30-day Trial AAII Membership to start becoming an effective manager of your assets.



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