Data and Research May 4, 2015

Having a Plan for Retirement Increases Confidence

A survey suggests the workplace is emerging as a fruitful venue for engaging individuals in broader retirement planning.
Reported by

Forty-five percent of respondents to a survey from Deloitte Center for Financial Services feel “very secure” in having enough savings and income to maintain a comfortable retirement lifestyle.

This is a sizable jump from the 28% in Deloitte’s initial survey in 2012, but the survey report’s authors say this positive increase could be a direct result of strong recent growth in investment returns, and they are concerned this sentiment may be “fleeting.” It could be reversed by a downward shift in the economy or rising interest rates, which could influence stock market volatility.

Get more!  Sign up for PLANSPONSOR newsletters.

The majority (55%) of those surveyed still do not feel financially set for their senior years despite improved economic conditions.

Those with a formal plan for retirement savings and income were more than twice as likely to say they feel secure about their retirement as individuals without one. Yet, of those consumers surveyed who felt very secure about retirement, 17% did not have either a financial adviser or a plan for retirement. One in five respondents said they don’t have a plan for retirement because they haven’t taken the time to meet with a financial professional. Three in 10 said they intend to put a plan together, but haven’t set aside the time to do so.

The survey reveals the workplace is emerging as a potentially fruitful venue for engaging individuals in broader retirement planning, with surveyed consumers ranking workplace retirement plans as the second-most trusted source for financial information, ahead of an individual’s primary financial institution and behind only his or her primary financial adviser.

Fewer than one-third (29%) of consumers in the current survey felt that financial institutions in general were highly trustworthy, while only one-third of respondents felt that way about financial professionals overall. But that response was different when it came to assessing their own financial adviser, with 78% of respondents saying that they trusted them, compared to 68% in 2012.

The Deloitte Center for Financial Services commissioned Andrews Research Associates to conduct an online survey of 2,000 U.S. consumers in September 2014, focusing on the factors impacting respondents’ feelings of security around retirement finances. The consumer data was supplemented with in-depth telephone interviews with 178 financial advisers. The survey report is here.

Data and Research May 4, 2015

Most Working Age People Plan to Partially Retire

The idea of “semi-retirement” has grown in popularity among working age people as they look ahead to an uncertain financial future.
Reported by

A new study from HSBC finds more than four in 10 working Americans plan to semi-retire when leaving the full-time work force—nearly double the number of current retirees who report that they left full-time work in steps (22%).

When studying working age people around the world, the number planning to semi-retire jumps to more than half (56%) of current workers. HSBC’s “The Future of Retirement: Choices for Later Life” report reveals among that group, the majority (54%) plan to stay in the same job, but work fewer hours.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

In today’s world, the process of retiring is often more of a gradual transition, with many opting for a move into semi-retirement first, explains Charlie Nunn, group head of wealth management at HSBC. He adds that respondents gave different reasons for wanting to enter into semi-retirement, with more saying they’ll do so by choice than by necessity. This directly conflicts with other research findings that show people often don’t have control over their date of retirement due to health or employability reasons—implying harmful cognitive dissonance may be impacting retirement decisionmaking in the U.S. work force.

Current semi-retirees say they entered the transition period for positive reasons, such as to keep active or keep their brain alert (34%); because they like working (29%); because they do not want to retire full time, at least immediately (26%); and to reduce stress (22%). On the other end of the spectrum, 7% say they have or had family members to support, requiring them to work past normal retirement age; while another 9% are no longer able to find full-time employment. One in 10 say they want to bridge a shortfall in retirement income, 11% are unable to afford to retire full-time, and 17% point to health reasons or physical demands.

The study further identified a reliance on an inheritance among working age people. Nearly two-thirds (66%) who have received or expect to receive an inheritance believe it will help to fund their retirement, while more than a quarter (27%) expect it will completely or largely fund it.

“Living inheritances add another dimension to the already complex financial pressures faced by retirees,” says Andrew Ireland, an executive vice president and head of premier banking for HSBC Bank USA. He adds that by relying on an inheritance, “people are putting their future finances at risk.” That inheritance may not always be forthcoming, as less than a third (32%) of working age people have received an inheritance.

With regard to spending, saving, or passing along their own wealth, most respondents (66%) say they will spend some and save some money to pass on to the next generation. Another 21% admit they will spend all their money and let the next generation create its own wealth, while 13% will save as much money as possible to pass on to the next generation. For Americans specifically, 14% more people agree it is better to spend all their money, rather than save to pass on to the next generation.

Additional findings reveal U.S. retirees are 17% less likely than the global average to financially support other people, with 43% currently supporting at least one additional person. On a global scale, 41% worry about being able to financially support their family or friends when retired, and 40% are concerned about being reliant on family or friends for financial support in retirement.

The study also reveals more than two in five people plan to move when they retire, with relocation from a town or city to a rural area being the most prevalent choice. Moving abroad is also an option for many in retirement, with the most popular destinations including the U.S. (19%), Australia (17%), Canada (16%) and New Zealand (16%).

“It’s essential that people of all ages adequately prepare for life’s later stages. Even the smallest amount saved today can contribute to the lifestyle you want in retirement and the legacy you hope to leave,” Ireland concludes. “Those who fail to plan may find that any kind of inheritance is unlikely and also that a comfortable retirement is beyond reach.”

HSBC prescribes four actions to help individuals plan for a better financial future:

  1. Be realistic about your retirement aspirations: Decide how you want to spend your retirement and be realistic about how much money you will need.
  2. Review your long-term working plans: Determine the age at which you can afford to fully retire and include expectations about semi-retirement.
  3. Consider your wider financial commitments: Review the long-term financial needs for yourself and your family and include both in your planning.
  4. Have a clear retirement plan: Analyze how you will fund your retirement, not assuming an inheritance. Be sure to seek financial advice for assistance if needed.

The “Future of Retirement: Choice for Later Life” report is the eleventh in its series and includes responses from more than 16,000 people in 15 countries and territories worldwide. Statistics were obtained through an online poll in August and September 2014. More information about the report and findings is available on HSBC’s website.

«