Data & Research October 29, 2018

Study Identifies Retirement Planning Advice Gaps Advisers and Financial Firms Can Address

"Choosing appropriate investments” is a top pain point for all individuals no matter their place in the retirement planning spectrum, Hearts & Wallets found.

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Even when financial tasks are difficult, individuals often do not seek professional help, suggests a report from Hearts & Wallets.

The report, “Pain Points & Actions: Insights to Address Large Advice Gaps by Reaching Consumers with Unmet Needs,” is an insight module drawn from the latest survey of the more than 46,000 U.S. households in the Hearts & Wallets Investor Quantitative Database. Individuals in the study say a range of financial tasks are more relevant to them than six years ago. For retirees and pre-retirees (those within five years of retirement) 14 of 16 financial tasks have relevance to three-fourths of these groups. Two of the largest increases are “knowing how to find resources to plan financially in retirement” and “developing a strategy to withdraw from multiple accounts,” both up 9 percentage points since 2012.

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Accumulators (individuals still focused on working and saving) say 11 of 14 financial tasks are relevant to 90% this group, with the largest increases seen in “choosing investments” and “handling market volatility emotionally,” both up 11 percentage points since 2012. However, “choosing appropriate investments” is a top pain point for all individuals, including more than half (57%) of accumulators, 43% of pre-retirees, and nearly one-quarter (24%) of retirees.

For younger individuals, ages 28 to 39, the No. 1 advice gap for this group is “identifying what year I might stop working full-time.”

“Financial tasks like retirement planning are hard,” Laura Varas, CEO and founder of Hearts & Wallets says. “Consumers get confused or default to inertia because they don’t understand which solution out of the wide range of offerings in the marketplace fits their specific needs. Firms need to personalize products and advice so that consumers easily see what options are available to help them and don’t default to inertia.”

The findings can also inform plan sponsors and participants regarding the education retirement plan participants need.

Individuals not seeking help

Of the 59% of accumulators who have difficulty with retirement planning, including how much to save for retirement, only 16% have sought help. And among 39% of pre-retirees who have difficulty with developing a strategy to withdraw income from multiple accounts during retirement, only 11% have sought help.

For younger individuals, ages 28 to 39, only 3 out of 14 financial tasks have rates of seeking help above 20%.

Information about how to purchase the report is available here.

Client Service October 29, 2018

Another Survey Finds Saving for Retirement Is Employees’ Top Financial Concern

Monthly expenses are their second concern, The Standard found in a survey.

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For 70% of employees, regardless of their income level, saving for retirement is their top financial concern, The Standard learned in a survey. Their next concern is monthly expenses (57%), followed by medical expenses (52%), support in the event of a disability (52%) and paying the mortgage/rent (49%).

“We found that saving for retirement outweighs other important priorities, such as ensuring employees have enough money for a roof over their heads or medical expenses,” says Chris Dugan, director of retirement plan communications for The Standard. “Given its importance to employees, it’s crucial for advisers and employers to do what they can to help support their retirement readiness efforts.”

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Only 33% of employees are confident about their level of retirement readiness. Dugan suggests that sponsors adopt automatic enrollment and escalation, noting that the survey found that 68% of employees support those options. Among Millennials, it’s 70%; Gen Xers, 66%; and Boomers, 64%.

“Employers should also consider a managed account service as the qualified default investment alternative, which offers annual automatic deferral rate increases that are customized to the needs of an individual,” Dugan adds. “For most, this is just a 1 or 2 percent increase. But even a small additional increase each year can help make a specific goal a reality.”

The survey also found that 50% of employees are not comfortable selecting their retirement plan options, and 55% would like to turn to a professional to make those decisions.

“Employees can benefit from using a managed account service through their retirement plan, which is often very affordable, to help with investment decisions,” Dugan says.

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