Retirement Software Study Leads the Way to Better Planning for Baby-Boomers

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Windsor, CT, January 29, 2003 � For millions of baby-boomers, the retirement years will be unlike those of any previous generation. And unlike previous generations, the new retirees will have software and technology to help them manage the risks and uncertainties of living longer and needing to be more self-reliant in retirement.

A new evaluation of retirement planning software conducted by LIMRA International, the Society of Actuaries, and the International Foundation for Retirement Education (InFRE) looks at those risks and identifies ways that software programs can adapt to the pending post-retirement period.

“Retirement software has become an excellent tool to help individuals and their financial advisors figure out how to get ready for retirement,” said Eric T. Sondergeld, ASA, CFA, MAAA, corporate vice president and head of LIMRA’s Retirement Research Center. “The next challenge is to create tools that will help people live in retirement, and this study points the way.” Key findings in the study include the following:

    Programs give a wide range of answers about when a retiree will run out of money.
    The software can do more to help people understand and deal with post-retirement risks.
    Programs vary in their ability to handle different personal or tax situations such as home ownership and two- earner couples with two sets of benefits.

The project examined 19 retirement software programs, six designed for consumers and 13 others for use by professional advisors. The examiners created six scenarios representing various stages and circumstances of retirement. The study tested the programs for such factors as ease of use, quality and clarity of results, capabilities, and treatment of risks.
The report makes recommendations for financial services providers, financial planners and advisors, consumers, actuaries, and software makers, including suggestions for using and improving retirement planning software. It does not compare or rate the programs.

“Actuaries are deeply involved in retirement issues, and these findings are extremely important to the public and the profession,” said Anna M. Rappaport, a member of the study committee and a former president of the Society of Actuaries. “We encourage actuaries to use this information to help financial services providers and advisors, as well as software makers to improve the retirement planning process.”

Due to longer life-spans, earlier retirements, rising health-care costs, and especially the reduced availability of traditional employer-sponsored pensions and retiree health plans, current and future retirees face greater risk than previous generations. Among these risks are:

Longevity � Without sound planning, retirees need to be concerned about a greater threat of outliving their assets.

Inflation � Even with low inflation, years of compounding can eat away at needed purchasing power late in life.

Investment � Future retirees will depend more on their own assets to provide income, and must find ways to live with the uncertainties of returns on stocks and bonds over time.

Health � Today’s retirees often enjoy years of retirement, but face increasing costs of health insurance and challenges in securing health coverage, as well as the need to provide for long-term care if they become severely disabled.

“Planning before and during retirement is an extremely complex process and no computerized tool can provide all the answers,” said Betty Meredith, CFA, CFP, CRC, a member of the project oversight committee and the InFRE Board of Governors. “Consumers and professional advisors should look at a variety of scenarios in planning, considering the potential risks they may face.”

The report offers software makers numerous suggestions for improvement, including making it easier for users to update their plans as their circumstances change, as well as increasing program versatility in handling home equity, client-specific goals, unique individual circumstances, and other factors in financial planning.

The report also offers consumers advice on how best to use the programs. For example, users can run multiple scenarios, and make sure they understand how a program handles their own situations. Visit the LIMRA Web site at for more information. This release is in their “press room” and at time of posting, that press release has a link to view the full report.

LIMRA International is a worldwide association providing research, consulting and other services to nearly 850 insurance and financial services companies in more than 60 countries. LIMRA was established in 1916 to help its member companies maximize their marketing effectiveness.

The Society of Actuaries is the world’s largest professional society organization of actuaries with over 17,000 members in 47 countries. The Society’s mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems involving uncertain future events.

The International Foundation for Retirement Education (InFRE) was founded in 1997 in response to America’s impending “retirement crisis” to provide training and certification for retirement professionals and counselors and to be the nation’s primary, independent source of information and educational programs concerning retirement issues.