SPECIAL FROM Next Avenue
A new survey about boomers and retirement calls to mind the famous lyrics from "Annie": “The sun’ll come out tomorrow…”
To kick off National Retirement Planning Week (You didn’t know? There’s still time to send a card.), the Insured Retirement Institute (IRI) today released its fourth annual report on the retirement preparedness of boomers, called Boomer Expectations for Retirement 2014.
Before I get to the findings, a quick caveat: The IRI is a retirement income industry group comprised of insurers, asset managers, broker-dealer distributors and financial professionals. So you can be forgiven for skepticism about the group’s vested interest in getting boomers to buy investments and insurance policies and to hire financial advisers.
That said, here’s what the study of 800 Americans aged 51 to 67 found:
Boomers’ confidence in their retirement plans continues to decline, but they’re growing optimistic about their financial future. Only 35 percent of boomers said they’re confident in their efforts to prepare financially for retirement, a significant drop from the 44 percent who felt that way in 2011.
“And those with low- to no-confidence have surged over the time we’ve been conducting the study,” said IRI Senior Vice President Danielle Holland.
However, more than four in 10 boomers (42 percent) said they expect their financial outlook to improve in five years. In 2012, just 32 percent believed that. “So there’s some optimism from that standpoint,” said Holland.
The brighter-days-ahead view sounds a lot like what Wells Fargo just heard in its Financial Health in the U.S.: 2013 National Survey of Consumers survey. In that one, 58 percent of people 50 and older said they were “financially happy” and 57 percent of them said their overall standard of living was in good or great shape.
Frankly, I would’ve thought the outsized stock market returns in 2013 and the improving economy would have made even more boomers cheerier about their retirement situation and prospects in IRI’s survey.
When I asked Holland why they didn’t, she said: “One year of stock market returns doesn’t make for a lifetime of undersaving for retirement.”
Most boomers are saving for retirement, and some have saved a fair amount. IRI found that 80 percent of boomers have retirement savings; about half of them have saved $250,000 or more and over two-thirds have saved at least $100,000.
However, only 70 percent of unmarried boomers had retirement savings, which raises concerns about retirement prospects for single men and women in their 50s and 60s.
Boomers are increasingly setting their retirement dates. “One of the most striking developments since we began this research series is the decline in boomers who did not know when they would retire. That number has been cut in half,” IRI President and CEO Cathy Weatherford said in a statement. Only 17 percent of boomers surveyed were uncertain when they’d stop working and retire, down from 35 percent in 2011.
More boomers now say they plan to retire at 70 or later. This reflects data from other recent retirement surveys. IRI found that 28 percent of boomers expect to retire at 70 or later, up from 17 percent in 2011.
Boomers doing their retirement planning with a financial adviser are more than twice as likely to be confident in their plans than ones doing it on their own. Nearly all the boomers with advisers (94 percent) have retirement savings vs. 68 percent of those going it alone.
Women tend to be underserved by financial advisers in general, though, said Katie Libbe, Vice President of Consumer Insights for Allianz Life, which regularly publishes its Women, Money, and Power study. “They feel the way materials on financial planning are presented tends to be dull, boring and hard to understand,” Libbe added.
The IRI study’s finding that boomers’ retirement confidence has fallen seems to contradict the recent Employee Benefit Research Institute’s (EBRI) Retirement Confidence Survey.
In that study, Americans’ confidence in their ability to afford a comfortable retirement rose from a year ago — 55 percent of workers said they were confident about having enough money for a comfortable retirement, up from 51 percent the year before.
Nevin Adams, Co-Director of the EBRI’s Center for Research on Retirement Income and Director of the American Savings Education Council, offered two reasons for the apparent contradiction.
“The IRI study was focused on boomers and ours was a broader demographic,” he said. Also, Adams said, the ones showing increased confidence in his group’s survey tended to be ones with employer-sponsored retirement plans; today’s survey didn’t distinguish between boomers who had plans and those who didn’t.
And, Adams cautions: “We saw an increase in retirement confidence, but not a big increase. So you shouldn’t say it’s time to break out the champagne.”
The Case for Hiring a Financial Planner
I think today’s study helps make a case for hiring a sharp financial planner as retirement approaches, as I’ve said previously on Next Avenue.
New guidelines from the Securities and Exchange Commission (SEC) might help you find one.
According to InvestmentNews, the SEC just gave financial advisers its blessing to publish online testimonial comments about their services that appear on independent websites, like WalletHub, Yelp or Angie’s List. They can even include a mathematical average of the comments about them from a site.
Until now, advisers were skittish to do this kind of thing, because the SEC had frowned on it.
"This represents a major breakthrough for consumers" who will now be "free to compare the professionals who manage our money with the same level of discerning and transparencey that has been available for years in other areas of consumer spending, from restaurants to electronics," WalletHub CEO Odysseas Papadimitriou told me. "It will certainly be interesting to see consumers reap the practical benefits of this landmark decision moving forward."
But advisers can only include online what clients have said about them if: they include the positive and negative reviews; they have no connection to, or influence over, the site where the comments ran and they publish all the comments unedited.
One last thing: There are eight days left to open an Individual Retirement Account for 2013 (maximum contribution: $5,500 or $6,500 if you’re 50 or older). If you haven’t funded a 2013 IRA and can, do.