Summary of "State Retirement Income of 2024"

Here’s our summary of Morningstar's “State of Retirement Income: 2024” report

Core Focus

The research explores retirement spending strategies and how they balance two key goals:

• Maximizing lifetime spending (retiree’s consumption)

• Leaving a bequest (for heirs or charity)

To evaluate this trade-off, the report introduces a new metric: the spending/ending ratio, which measures how effectively different strategies convert portfolio assets into retirement income vs. what's left after 30 years.

Key Strategies & Findings

1. Flexible Spending Strategies (e.g., Guardrails)

   • These adjust withdrawals based on market performance.

   • When combined with delayed Social Security, they can boost lifetime income significantly.

   • However, they may result in lower leftover balances (i.e., smaller bequests).

2. Delaying Social Security

   • Greatly improves long-term income—especially for those with average or above-average life expectancy.

   • Works best when retirees can fund early retirement years with nonportfolio income (e.g., part-time work, rental income).

   • If early withdrawals from the portfolio are needed, the benefits of delaying Social Security are diminished.

3. Annuities (Immediate or Deferred)

   • Can also enhance retirement income.

   • Similar to delayed Social Security, they boost income at the cost of reducing portfolio assets early on, which limits compounding.

     
     
   
   

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Click the file below to read the full report:

State_of_Retirement_Income_2024.pdf

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