Data and Research June 6, 2017

Family Resources Expected to Be a Big Part of Retirement Income

A survey also found U.S. investors rank long-term care and health care costs as their biggest threat to financial security in retirement.
Reported by

Seventy-eight percent of investors overall feel that funding retirement is increasingly their responsibility, not the government’s, according to the Natixis Global Asset Management 2017 Individual Investor Survey.

One-third of investors overall believe government benefits will be unavailable when they retire. This breaks down to 41% for Millennials, 33% for Generation X and 22% for Baby Boomers.

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Interestingly, the younger age cohorts expect to retire early, even though they are most likely to live longer. Millennials say they plan to retire at age 59, Gen X at 58 and Baby Boomers at 65.

A full 98% of investors believe personal savings will be their most important source of retirement income. Eighty-one percent rank public pensions or Social Security benefits as an important retirement income source.

Family resources are expected to be a big part of retirement income—77% for investors overall and 81% for investors with children. The family resource most likely to contribute to retirement income is a spouse’s retirement savings (77%). More than four in 10 investors (43%) expect to rely on an inheritance, and 38% say contributions from children will be a source of retirement income. More Millennials (62%) expect to receive an inheritance than Gen Xers (42%) or Baby Boomers (31%).

NEXT: Obstacles to retirement security, and retirement preparations

U.S. investors surveyed rank long-term care and health care costs (27%) as their biggest threat to financial security in retirement. They also cite “not saving enough” (19%); “government benefits won’t cover enough” (11%); “inflation” (12%) and “outliving assets” (15%) as threats to financial security in retirement.

The survey results show investors are being proactive in retirement planning. Sixty-two percent say they have clear financial goals, and 56% say they have a financial plan that is helping them reach their goals. Seventy-three percent say they have a general figure in mind for how much is needed to be saved for retirement, and 62% report they know how much they need to save each year to meet retirement funding goals. Sixty-nine percent have estimated the expenses they will have during retirement, and 64% know how much income they will need annually to fund their desired retirement lifestyle.

However, the survey found that, despite the tax implications of missing required minimum distributions (RMDs), some Baby Boomers are unaware of these regulations or don’t understand them. Twenty-eight percent report they don’t fully understand the RMD requirements; 25% of Boomers who have a financial adviser say that person has never talked with them about RMDs; and 39% have not explored proactive ways to manage the tax impact of their withdrawals.

Investors understand the value of getting financial advice: 76% say a financial adviser can help them achieve their financial goals, and 62% believe they will still need financial advice in retirement. Sixty-nine percent say investors who have a professional financial adviser are more likely to reach their financial goals than those without one.

Natixis surveyed 750 individual investors across the U.S. possessing a minimum of $100,000 in investable assets. The group included 223 members of Generation Y, also known as Millennials (ages 21 through 36); 251 from Gen X (ages 37 through 52); and 236 Baby Boomers (ages 53 through 72), as well as 85 retirees. The online survey was conducted in February and is part of a larger global study of 8,300 investors in 22 countries and regions from Asia, Europe, the Americas and the Middle East.

Ask the Experts June 6, 2017

(b)lines Ask the Experts – When the Individual Who Signed Form 5500 Retired

“We are starting preparations for our retirement plan’s Form 5500 annual return filing; however, the individual who signs our returns as employer and plan administrator retired, and the new person taking over the position inquired as to exactly who should be signing as the employer and plan administrator. Do the Experts have any guidance on the subject?”
Reported by

David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer: 

Thanks for asking the first question of this year’s 5500 filing season! Yes, the Experts can provide you with some information in this area. Since the individual who retired, was signing as both the employer and plan administrator, unless he/she was doing so incorrectly, the plan administrator for your plan is likely identified in the document as the employer. However, this is not always the case, so it is important to check the plan document to confirm who is named as the plan administrator; it can be the employer, a specific internal party, or a third party. For more details, see our prior Ask the Experts column on the subject.

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As for who signs as the employer, it must be an authorized representative of the employer. This is generally an individual who is authorized by the Board or appropriate committee to sign all documents related to the plan, such as the plan document, plan service agreement, investment contract, etc.  Since your authorized signor recently retired, you will likely need to go through your plan’s governance procedures to authorize the new individual to sign on behalf of the plan, if you have not already done so. Also, the new individual will need to obtain electronic filing credentials for the Department of Labor’s EFAST2 electronic filing system.

Finally, it should be noted that the Employee Retirement Income Security Act (ERISA) only requires the plan administrator to sign the Form 5500, though in practice both the employer and plan administrator signature blocks are often completed. It is also important to note that, although Form 5500s are now filed electronically, ERISA requires that a hardcopy of the annual report with all required signatures be maintained as part of the plan’s records.

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.  

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@strategic-i.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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