NOT ALL EXPENSES ARE CREATED EQUAL: ALLIANCE FOR LIFETIME INCOME RECOMMENDS NEW APPROACH TO RETIREMENT INCOME PLANNING

Alliance’s M.U.G. initiative intends to start a nationwide conversation about the must-have money people will need throughout retirement

WASHINGTON, D.C., March 5, 2020 — Today, the Alliance for Lifetime Income announced the launch of its M.U.G. initiative, which is a new consumer education effort to help Americans think about and focus on planning for retirement income, not just accumulating a lump sum of money for retirement. M.U.G., is an easy-to-remember term that’s meant to represent the various essential monthly expenses people often need to cover in retirement, including things like mortgage, utilities, groceries and transportation.

M.U.G. is a fresh approach to the longstanding challenge of planning for a lifetime of income in retirement. The approach starts with a simple first step: start by adding up your essential monthly expenses, and then create a plan that ensures you have enough protected lifetime income to help pay for them, all while keeping in mind that there are only three sources of protected lifetime income – Social Security, pensions and annuities – that can be used to help cover those expenses.

The Alliance also unveiled findings from a new research study about M.U.G., which takes a fresh look at how Americans think about and plan for essential monthly expenses in retirement. The research found that Americans approaching or in retirement consider 62% of their expenses to be “essential,” with housing (e.g., mortgage, rent, condo fees), utilities and groceries being the most frequently named M.U.G. expenses, while healthcare, car, and cell/landline/internet costs making up the next tier. Surprisingly, less than a third (29%) are very confident they can cover their essential expenses throughout the remainder of their retirement, and only a quarter (25%) are very confident they can cover all their expenses.

Other key findings from the study include:

• The average cost to cover monthly essential expenses is $2,509, with nearly one in ten (8%) saying their essential expenses cost over $5,000 a month.
• Having a source of regular, protected monthly income in retirement is important to nearly everyone (97%), and very important to seven in ten (69%).
• Pre-retirees who have other sources of protected lifetime income in addition to Social Security – that is, pensions or annuities – are nearly twice as likely to be very confident about their ability to cover essential expenses in retirement (39% versus 21% of those without protected lifetime income).
• Among those with protected lifetime income, 68% say they have money left over each month after paying their monthly expenses, versus 49% of those without protected lifetime income.
• Nearly all respondents (92%) feel that it’s important to their overall quality of life to be able to afford their top non-essential expenses, such as travel, hobbies, and entertainment. Those with protected lifetime income were much more likely to be very confident in their ability to afford the non-essentials they care about the most (58% versus 38% of those without protected lifetime income).

These and other data from the Alliance survey spotlight the highly personal challenges posed by retirement income planning, and how everyone’s individual needs can be different. The survey results underscore the need for a simple, easy and personal approach to getting started on a retirement income plan.

“Our research shows that an overwhelming 85% of Americans report closely managing their monthly household budget, so why is it that we don’t use the same approach in our retirement planning?” said Jean Statler, executive director of the Alliance. “The problem is that many Americans are often left wondering where to start, how to add it all up and how to create a budget in the midst of so many unknowns. By adding up those essential monthly expenses, people can take that first step. Step two is ensuring they have protected monthly income to help cover their M.U.G. With fewer than 17% of private sector workers having access to a pension these days, and Social Security only covering about 40% of our pre-retirement income, protected lifetime income from an annuity can be used to help fill that gap. Understanding your M.U.G., and ensuring you’ll have a check each month to help pay for it, can make people feel more confident and secure knowing at least that part of it can be covered for life.”

Jean Chatzky, educational fellow with the Alliance, financial editor of NBC’s Today Show, and founder/CEO of HerMoney, said, “As a personal finance journalist, entrepreneur and mother, I’ve been either covering or working in the trenches with real people and their real money for more than two decades now, and I find that M.U.G. is one of the most simple and important first steps you can take in planning for a secure retirement. Many of the people I talk with, who tackle the daily reality of paying the electricity bill or stocking the fridge, have a difficult time connecting the role of protected lifetime income from an annuity to retirement. M.U.G. finally makes that connection real. Now we have a way to sit down at the table with a financial advisor or family member and figure out our ‘must-have-money’, and how to make sure it’s covered.”

Accompanying the national rollout of M.U.G. are various tools, educational resources and information that consumers can use to begin planning their essential expenses and calculating how much protected lifetime income they’ll need in retirement. These include: the M.U.G. Guide, an educational guide designed for people who are thinking about their retirement income plan but don’t know where to start. The guide simplifies the challenge of income planning by providing easy-to-understand information and a new M.U.G. worksheet.

The Alliance is also making the guide available to financial advisors on its Financial Professional Resource Center, along with companion material to help advisors have simple planning conversations with their clients about their monthly expenses and the importance of protected lifetime income.

“M.U.G. has perfect timing,” said Steve Gresham, senior education advisor to the Alliance, chairman of Whealthcare Planning LLC., and author of The New Advisor for Life. “Retirement income planning is the future for the financial advice industry and yet can be one of the most daunting challenges for advisors and their clients. We can never make planning too simple. Beginning the process grounded in the realities of everyday life is essential – and common sense. Financial advisors should start every retirement planning conversation by asking, ‘what’s your M.U.G.?’”

To learn more about M.U.G., please visit
www.ProtectedIncome.org/basic-expenses-income-planning
Download the M.U.G. Study Research Findings

To learn more about the Alliance, visit
www.ProtectedIncome.org.

About the Alliance Survey

This online study was conducted from January 28 – February 5, 2020 among a Census-balanced cross-section of 1,015 U.S. adults ages 40-79. The study was conducted by Artemis Strategy Group.

About the Alliance for Lifetime Income

The Alliance for Lifetime Income is a non-profit 501(c)(6) educational organization based in Washington, D.C., that creates awareness and educates Americans about the value and importance of having protected lifetime income in retirement. Our vision is for a country where no American has to face the prospect of running out of money in retirement. The Alliance provides consumers and financial advisors with educational resources, interactive tools, and actionable research and insights to use in building retirement income strategies and plans. We believe focusing attention and conversations on retirement income that lasts throughout life leads to greater retirement security for millions of Americans. Learn more at www.ProtectedIncome.org.