Separate studies have looked at similar concerns around the world: –60% of people in Latin America do not believe that they have enough savings to last through retirement.27 –58% of people in the European Union do not feel confident that they will have enough money to live comfortably throughout their retirement.28 –The proportion of workers in Asia worrying about being poor and in need of money when they are retired ranges from 50% of those surveyed in China to 95% in Viet Nam.29 –70% of Americans are worried about not having enough to fund their retirement.30 However, despite these fears, retirees tend to draw down their savings conservatively if they have the option. In the United States, for example, retirees generally still have 80% of their pre-retirement savings after almost two decades.31 While this can be partially explained by bequest motives, the average person appears to be unsure how much they can safely spend in retirement, which may speak to their limited comfort with their own longevity literacy32 (their understanding of how long they will live33) or concerns about future financial volatility, often exacerbated by worries about the long-term resilience of public retirement systems. Over the past few decades, the retirement landscape for individuals has changed significantly, from guaranteed income to risk and uncertainty. In place of a guaranteed level of retirement income with limited risk for workers, companies have ceded responsibility to the individual, enabling the potential for higher returns and flexibility, but with the downside challenges of uncertainty and risk. Many employers also used the transition to defined contribution plans to reduce contribution rates. This has long-term ramifications for individuals’ retirement-preparedness. Existing financial solutions, such as annuities, appear to struggle to adequately meet the need for a lifelong income. The “annuity puzzle” is the discrepancy between the predictions of economic models, which would suggest high annuitization rates, with the small proportion of retirees who hold an annuity. For example, in the United States, approximately 12% of the population with sufficient financial assets to purchase an annuity (e.g. more than $100,000) chooses to buy one.34 Recent findings by the Center for Retirement Research indicate that while approximately half of the population surveyed with assets sufficient to buy an annuity do want to buy an annuity for lifetime income security, they do not follow through on that desire.35 Studies have tested whether low annuity take-up can be explained by lack of liquidity or inability to make bequests.36 A further reason may be that people feel uncomfortable converting a large sum of money irrevocably into an annuity, as this may reduce their ability to withstand financial shocks. Individual investors are turning to their own investment solutions to address decumulation challenges. With fewer retirees opting for annuities, many are turning to self-directed investment strategies to generate income in retirement. According to the 2024 Global Retail Investor Survey, retail investors are more likely to organize their decumulation strategy around dividend-paying stocks (39%). Others prefer working with financial advisers (31%) or adopting flexible withdrawal strategies (26%) based on market conditions or life expectancy; in contrast, only 17% plan to purchase an annuity, highlighting a broader preference for liquidity and control over more rigid, guaranteed income structures. As individuals take on greater responsibility for their retirement securities, the financial services industry has an opportunity to offer more accessible, flexible solutions that balance income stability with investment growth.2.2 Understanding the challenges Future-Proofing the Longevity Economy: Innovations and Key Trends 1616

Future Proofing the Longevity Economy 2025