Baby Boomers, Insufficiently Prepared for Retirement, Need Access to Advisers

To kick off National Retirement Planning Week, the Insured Retirement Institute (IRI) hosted a media call during which Frank O’Connor, vice president, research at IRI, noted that in 2011, when the IRI first conducted its survey of Boomer expectations for retirement, 75% had retirement savings. Today, only 55% of Boomers have retirement savings, and among this group, half have less than $250,000 put away.

O’Connor said the reasons fewer Boomers have retirement savings today is likely because they were forced to use those savings early and/or had low balances. Equally troubling, he said, is the “large number of Boomers who lack any kind of planning for retirement. Most have not set a retirement goal.” As a result, “many Boomers are not confident their retirement savings will last throughout retirement or that they will have money for long-term care.”

IRI’s research also found that 24% of Americans plan to retire before the age of 65. Twenty-nine percent plan to retire between the ages of 65 and 69, and 26% plan to retire at age 70 or older. However, only 7% of retired workers said they left the workforce at age 70 or older.

The average annual Social Security income a retired couple can expect is about $28,000 per year, while the average couple ages 65 to 74 today spends about $55,000. Only 30% of Boomers surveyed believe that they will need $55,000 annually or more in retirement income.

Seventy percent of those who work with a financial adviser have calculated a retirement savings goal. However, many of these advisers are failing to include health care and long-term care costs in these equations, as only 50% of those working with a financial adviser have included health care costs in their retirement savings goal, and only 36% have included long-term care in that equation.

By comparison, a mere 25% of Americans who do not work with a financial adviser have calculated a retirement savings goal, and that percentage is the same for those who have included health care costs and long-term care costs in that figure. IRI estimates that a 65-year-old couple retiring in 2018 can expect to pay $363,946 in lifetime Medicare and supplemental insurance premiums, as well as out-of-pocket costs—not including the cost of long-term care.

Eighty percent of Boomers surveyed said that it is very or somewhat important that retirement income sources be guaranteed for life. However, traditional workplace pensions are a disappearing commodity and too few Boomers are taking advantage of the one available product that can provide protected lifetime income—annuities. Two-thirds of Boomers who do not have an annuity cite insufficient savings or lack of knowledge as a reason for not owning one.

Working with an adviser and/or owning an annuity can boost retirement confidence, IRI found. Among those working with a financial adviser on a retirement plan, 77% say the adviser has come up with a retirement income plan. Sixty-nine percent say it includes a retirement savings goal; 65%, a Social Security claiming strategy; 48% a health care plan; 46%, an estate plan; 42%, an annuity; and 41%, a long-term care plan.

Forty-seven percent of those working with an adviser and 48% of those who own an annuity think they will have enough money to live comfortably in retirement. Forty-eight percent of those working with an adviser and 54% of those who own an annuity think their money will last until age 90.

Also speaking on the media call was John Kennedy, senior vice president and head of retirement solutions distribution at Lincoln Financial, who said a Consumer Retirement Index that Lincoln just released found only 25% of Americans are very confident about retirement—that they will have enough money to last throughout their retirement, that they will be able to convert their savings to lifetime income and that they will be able to maintain their lifestyle in retirement.

“Income planning is the most important topic for those over the age of 45,” Kennedy said. “Annuities, both fixed and variable, can guarantee income that you cannot outlive.”