Data & Research February 7, 2013

More Account Adjustments Made After Retirement

Households are more likely to make account and investment adjustments at retirement and in the five years following, than in the five years before.

Reported by

Corie Russell

Specifically, 7% of households with a retirement in the past 12 months moved IRA assets from one firm to another, as did 3% of early retiree households, Cerulli Associates found. Four percent of pre-retiree households moved IRA assets from one firm to another.

Cerulli also found 13% of at-retirement households and 7% of early-retiree households rolled over retirement accounts, compared to 4% of pre-retirees. “[Pre-retirees] don’t know what they don’t know, or they’re just not thinking about it yet,” Bing Waldert, director at Cerulli Associates, told PLANADVISER.

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Twelve percent of at-retirement households and 3% of early-retiree households took a lump-sum distribution of a retirement account, versus 1% of pre-retiree households.

“In a best-case scenario, investors would go to their adviser exactly five years before their 65th birthday, statements in hand, ready to plan for their retirement,” Waldert said. “However, research shows that rarely happens for a number of reasons—procrastination, lack of urgency. Retirement doesn’t always occur as a neatly preplanned event.”

Waldert added that some investors are forced to retire earlier than planned because of layoffs or health issues, so they are “shocked” into retirement.

(Cont’d…)

The report suggests retirement income products should not only fit into a retirement planning strategy, but work for an investor who has already retired. Cerulli warns asset managers to not only consider how their products fit into a retirement planning strategy, but how they work for an investor who has already retired and is confused. For example, a product that provides guaranteed income immediately could be suitable for the confused early retiree.

Communication about retirement planning can be a challenge because some investors may simply not care, but Waldert said sponsors and advisers should not be afraid to use a variety of messages through different mediums.

These findings and more are from The Cerulli Edge: U.S. Asset Management Edition, February 2013 issue. To purchase the report, contact CAmarketing@cerulli.com. More information is available here: http://www.cerulli.com/zfiles/pdf/USAME_2-2013_TOC.pdf