Longevity: The Underlying Driver of Retirement Risk

Americas Baby Boomers are at the threshold of the most widely heralded passage into retirement of any generation. Maturing into senior citizen status brings to the forefront major concerns for their financial security and wellness. In light of our aging society, changes in employee benefits, and volatility of financial markets, retirement and its risks should be understood as a critical issue for all Americans, not just retirees. Individuals must now bear ever greater responsibility for managing their own assets as more employers abandon traditional defined benefit pension plans for defined contribution plans such as 401(k)s and self-directed IRAs. Retirees and those near retirement are, at best, only vaguely aware of the implications of taking on not just investment risks but also the longevity component of their financial security. Compounding these issues are changes in how Americans choose to work, leave the labour force, or partially retire.