Workers Need Planning Help Through Retirement

During a press call to kick off National Retirement Planning Week, Danielle Holland, senior vice president with the Insured Retirement Institute (IRI) said its recent study showed the percentage of Baby Boomers with no to low confidence increased from 23% in 2011 to 31% in 2014. In addition, those who said they are satisfied economically decreased from 77% in 2013 to 65% in 2014. One-quarter of Baby Boomers polled reported they postponed plans to retire within the last 12 months.

Holland noted that those working with an adviser are more confident. She said it is perhaps because, 94% of those working with, or who have worked with, an adviser have some retirement savings compared to 68% without an adviser, and 74% of those with an adviser have determined a savings goal, compared to 40% without an adviser.

The Employee Benefit Research Institute’s (EBRI) Retirement Confidence Survey (RCS) found Americans’ confidence in their ability to afford a comfortable retirement has recovered somewhat from the record lows of the past five years, but that result is among workers of all ages. And, Nevin Adams, director of the American Savings Education Council (ASEC) and co-director of the Employee Benefit Research Institute (EBRI) Center for Research on Retirement Income, shared in the press call that results from the RCS show retirement confidence is higher for those with an employer-sponsored retirement plan, and workers with an employer plan have more in savings than those without (see “Retirement Plan Offering Strongly Linked to Confidence”).

According to Rich Linton, president of Individual Markets at ING U.S. Retirement Solutions, there are many risks Americans do not think about when planning for retirement. He noted ING U.S. research found more than half (57%) of retirees face unexpected challenges, most often with managing savings and unexpected health issues. In addition, less than half of pre-retirees (42%) and retirees (44%) have a plan to manage their income in retirement.

Linton pointed out the five primary retirement financial risks are longevity, health care, market performance, inflation and withdrawal rate. Individuals have little or no control over the first four, so an income plan is the essential framework for preparing for retirement, Linton contended. In planning, individuals have to account for likely health care issues, and it is important to continue earning money on assets during retirement, he said. In addition, one key to making appropriate withdrawals is understanding the effect of taxes. Linton suggested everyone older than 50 should complete a retirement income analysis, and separate savings into needs, wants and wishes for retirement, while accounting for household shocks.

Linton said individuals can be more retirement ready through seeking holistic advice and guidance to minimize retirement risks, having an organized process and framework for retirement income planning, and having a strategy for turning savings into a steady stream of income that lasts a lifetime. They should use tools and resources to assess retirement risks and get holistic financial view. ING recently launched a web-based tool to help individuals have get a holistic financial view (see “ING U.S. Launches Online Budgeting Tool”).

Brent A. Neiser , CFP, senior director at Strategic Programs and Alliances National Endowment for Financial Education (NEFE), pointed out a tool from NEFE, myretirementpaycheck.org, addresses eight planning areas, and attempts to make retirement planning more understandable. He said people observe others preparing for and living in retirement, and they follow the example of others in their family who may have made uninformed decisions, so getting people more educated about retirement planning could also help those who are watching.

According to Scott Romine, EVP and national sales manager at Jackson National Life Distributors LLC, Jackson National Life Insurance Company and the Center for Financial Insight surveyed investors in April 2013 and found fewer than 18% of men and fewer than 11% of women said they have all the financial education they need to make appropriate investing decisions. An additional 39.6% of responding men and 33.7% of responding women reported that, while they have a basic understanding of knowledge about financial products, terms and methods, they would still benefit from more resources and advice to assist in making appropriate investing decisions.

In terms of what would make the most positive difference on their current financial outlook, “having an adviser whom I trust and who really gets me” was the top choice for both men (42.3%) and women (43.9%). In addition, more than one-third of both men and women chose “having assistance in filtering through the massive volume of educational resources available to get to the information that impacts me” as the top factor in making a positive difference in their financial outlook.

Presenters also shared educational needs for particular demographics. Kevin Molloy, senior executive director and head of Employer-Sponsored Business at AXA US, noted that traditionally teachers have had great retirement savings resources and tools, however there is gap between future need and future benefits. Pensions generally replace 60% to 75% of average salary, and in 15 states, 40% of teachers are not enrolled in Social Security. Katie Libbe, vice president of Consumer Insights at Allianz Life, shared that its “2013 Women, Money and Power Study” showed women think they need more money to be served by a financial adviser. In addition, they find financial planning materials dull and boring (see “What Women Want… in Financial Education”). They want a more fun and engaging education experience, and like to hear case studies or stories about women like them.

Additional findings from the IRI study include:

• As Baby Boomers age, they continue to gain clarity about when they plan to stop working and retire. In 2011, 35% did not know when they would retire. Today only 17% are uncertain.
• The percentage of not-yet-retired Boomers who are planning to retire at age 70 or later has increased each year, rising from 17% in 2011 to 28% in 2014.
• Boomers are slightly more likely to have savings for retirement than in prior years. In 2014, 80% of Boomers reported having retirement savings. Among those with savings, about half have $250,000 or more saved.
• In 2014, 55% of Boomers said they calculated a retirement savings goal, compared to 50% in 2013. Of those who have determined a savings goal, 76% said this calculation factors in estimated costs for health care expenses.
• In prior years, around two-thirds of Boomers believed leaving an inheritance to loved ones was important, but only 46% of Boomers shared this view in 2014.
• If tax incentives for retirement savings—such as tax deferral—were reduced or eliminated, nearly 40% of Boomers say they would be less likely to save for retirement. Overall, 75% of Boomers say tax deferral is an important trait of a retirement investment.
• The percentage of Boomers working with a financial adviser who are highly confident in having sufficient savings to live comfortably throughout their retirement years is more than double those who are planning for retirement on their own.
• Marital status has an effect on retirement confidence and retirement savings. While 86% of married Boomers had savings for retirement, only 70% of unmarried Boomers had savings for retirement.

The study report, “Boomer Expectations for Retirement 2014,” can be found at http://www.irionline.org.