Data & Research May 18, 2017

Advisers Should Consider Transfer of Wealth in Retirement Planning

Those who have received an inheritance have more positive feelings about retirement.
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People who have received an inheritance from their parents or relatives are more than twice as likely than those who haven’t to feel prepared for retirement (38% versus 17%), according to a survey by the Associated Press-NORC Center for Public Affairs Research.

Twenty-one percent of older Americans have received gifts or loans valued at $10,000 or more from their parents or older relatives. Forty-one percent of older Americans have received or expect to receive an inheritance, and 51% of adults age 50 and older say they have received at least one type of monetary gift or loan from their parent or other relative since turning 18.

Older Americans who have received a financial gift feel they have more choice about when to retire (70% versus 62%). Those who have received an inheritance also say they have saved enough for retirement over the past 10 years (29% versus 12%). Among retirees, those with an inheritance are more likely to say they saved enough in the decade preceding their retirement (57% versus 38%).

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Older Americans with an inheritance are also more likely to believe that their savings will last throughout their retirement (37% versus 21%).

Forty-six percent of people think their parents have a responsibility to provide financial assistance to an adult child if needed. Conversely, 56% of people think an adult child has a responsibility to help their parent with financial assistance if needed. In reality, 31% of adults ages 50 and older have helped their parents or in-laws financially, and 10% of adults older than 50 are currently receiving financial assistance from their family.

The findings are based on a survey of 1,683 people ages 50 and older. The full report can be viewed here.

Data & Research May 17, 2017

401(k)s and Home Equity Make Up Most Retirement Savings

Outside of Social Security benefits, Americans are looking to 401(k)s and IRAs to fund most of their retirement.
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Retirement investments such as 401(k)s and individual retirement accounts (IRA)s as well as home equity account for nearly half of all assets American families depend on for retirement outside of Social Security benefits, according to new research by the Employee Benefit Research Institute (EBRI).  

Moreover, families without such accounts typically have low asset levels, EBRI reports. According to the research, among working heads of families between the ages of 25 and 64 who don’t have a retirement account, 79.6% have financial assets less than $10,000. Only 13.1% of those with one have these kinds of asset levels.

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These accounts are also more popular among older workers. EBRI finds that the percentage of heads of households between the ages of 25 and 34 that have retirement accounts is 50.4%. That figure grows to 71.4% for those families with a head ages 55 to 64.

Debt levels are sharply lower for those with individual accounts: For all families with working heads ages 25 to 64, the median debt-to-asset ratio is 33.4%. However, for families with working heads ages 55 to 64, the median debt-to-asset ratio is 13.4% for families with “individual account” (IA) assets compared with 34.2% for families without IA assets. 

One-half of all of all families that have IA assets plus home equity rely on these for more than 78.2% of their retirement savings outside Social Security.

“The data show that it is overwhelmingly the case that individual account retirement plan assets plus home equity represent almost all of what families have to use for retirement expenses outside of Social Security and traditional pensions,” says Craig Copeland, senior research associate at EBRI and author of the report. “Those families without IA assets typically have very low overall assets, so they have almost nothing to draw from for retirement expenses (outside of Social Security).” 

The data comes from the Federal Reserve’s Survey of Consumer Finances (SCF). The full report, “Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth,” is published in the May 16, 2017, EBRI Notes, available online at www.ebri.org

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