November 16, 2012 (PLANSPONSOR.com) – The LGBT community is
concerned they may not be able to maintain their lifestyle in retirement and could
outlive their savings.
According to results from Prudential’s study, “The LGBT
Financial Experience,” lesbian, gay, bisexual and transgender (LGBT)
individuals have unique financial concerns that advisers may be overlooking.
Almost nine out of 10 LGBT survey respondents said a financial professional has
never approached them about their specific LGBT financial-planning needs,
despite only 25% of LGBT respondents saying their needs are similar to those of
the population at large.
The study highlighted one of the key drivers of concern
about retirement—the legal status of LGBT relationships, which can
significantly affect financial planning. LGBT respondents reported being very
concerned about the lack of Social Security or pension survivor benefits for
same-sex couples, as well as legislation that negatively affects LGBT rights.
Tax treatment, benefit inequality and inheritance rules for same-sex couples
were also big concerns for LGBT respondents.
Overall, almost half of LGBT respondents said they are not
confident they will have enough savings throughout their lives, or be able to
maintain their standard of living in retirement.
Among LGBT study participants, Baby Boomers are most
concerned about retirement. Many were affected by the recession, losing assets
in the stock market and real estate close to their retirement age. In addition,
the HIV epidemic has left many survivors taking early retirement through
disability, leaving them economically challenged for the duration of their
lives. Twenty-three percent of LGBT Baby Boomers report being retired, or
living on income from disability and Social Security.
“We need to educate the financial services industry [about
LGBT financial-planning needs], as well as the community,” Patricia Brzozowski,
diversity director, Women’s Strategy and Military Veterans Strategy at
Prudential, said during the LGBT Financial Experience event.
Michele Meyer-Shipp, vice president and chief diversity
officer at Prudential, said advisers must identify upfront the needs of clients
by asking specific questions such as, “What unique financial needs or concerns
do you have?”
Before advisers can market to the LGBT community, they must
educate themselves on these specific financial-planning needs, panelists
emphasized.
The LGBT Financial Experience 2012–2013 Prudential Research
Study was conducted by Community Marketing Inc. of San Francisco, which surveyed
a diverse group of 1,401 LGBT Americans ages 25 to 68 from urban, suburban and
rural communities throughout the 50 states in August 2012.
November 16, 2012 (PLANSPONSOR.com) - Saving and spending behaviors fluctuate wildly, setting the stage for varying levels of retirement confidence among Americans, a study found.
An overwhelming majority (88%) of affluent Americans (those with $250,000 or more in investable assets) “feel confident” they will have saved enough for the life they want in retirement, according to the Wells Fargo Affluent Retirement Survey. Americans with less than $250,000 in investable assets do not feel the same level of preparedness. In this group, confidence levels dipped to 57%.
Somewhat surprisingly, about two-thirds of those Americans with $250,000 or more in assets are not high earners. These working affluent had household incomes of less than $150,000. The key variants for the two groups are behaviors. These are people who spend less and save more. They are also aware of their finances and have written financial plans.
“What is striking about the ‘affluent’ is that their overwhelming confidence is not from guessing what they’ll need, but from disciplined saving, watching their spending and detailed planning,” said Karen Wimbish, director of retail retirement at Wells Fargo. “You don’t have to be an affluent earner to be an affluent saver and investor.”
Are there specific factors driving the behaviors that lead people to save more and spend less? “It all comes back to education awareness,” Wimbish told PLANSPONSOR. “We spend a lot of time with our plan sponsors on education awareness.” Participants need to be told that time is on their side, she noted. “The best thing you can do is start saving today.”
Affluent Americans Do Not Guess—They Plan
Nearly three-quarters (71%) of the affluent have a written plan for their finances in retirement compared with 43% of those who have less than $250,000 in assets. More than half (55%) of the affluent indicate they used detailed planning and calculations to estimate the percentage of their current household annual income needed to live on during retirement versus nearly one-quarter (24%) of those with less than $250,000 in assets.
Most of the affluent are methodical in their retirement planning, but a majority (73%) of Americans with less than $250,000 in assets “guess” the percentage of their current household income needed to support them in retirement.
Confidence among affluent Americans is supported by a solid majority saying they have “no financial fears” concerning retirement. Six-in-ten respondents (61%) expressed confidence in their planning and preparation—nearly twice the level of those (32%) with less than $250,000 in assets.
Anxiety is ramped down among the affluent. Just one-third (33%) said they “fear doing all the right things today but it still won’t be enough” for retirement, compared with half (52%) of those Americans with less than $250,000 in assets.
Affluent Americans consciously monitor their spending habits: one-quarter (24%) say they need to significantly cut back spending today in order to save enough for their retirement. Only half (50%) of those with less than $250,000 in assets indicate a need to spend less.
When it comes to the relationship between current financial savings and expectations about finances in retirement, the affluent are more prepared than those with lower asset levels. The affluent currently have a median balance of $500,000, far more than the median ($60,000) amount among people with less than $250,000 in assets.
Both groups appear to underestimate the amount needed to meet health care costs in retirement. The affluent estimate out-of-pocket health care expenses in retirement at $60,000, and those with less than $250,000 estimate $49,000—but both figures are likely insufficient to meet even the cost of Medicare deductibles alone, let alone actual direct costs of health care.
Primary financial concerns diverge, with one-quarter (27%) of the affluent citing health care costs as a top-of-mind daily financial concern, and 16% of those with less than $250,000 choosing health care. Instead, 43% of those surveyed in this group cited “paying bills” as a primary concern.
Comfortable with the Stock Market
Half (52%) of affluent Americans feel confident the stock market is a good place to invest for retirement versus 35% of those with less than $250,000 in assets. Given $5,000 to invest for retirement, nearly half of affluent Americans (48%) would invest the money in stocks or mutual funds, compared with nearly one-third (31%) of those with less than $250,000 in assets, who said they are more likely to put the money in a savings account or CD than would the affluent (32% versus 18%) and are more likely to invest that money in gold/precious metals than the affluent (22% versus 15%).
“The stock market may have felt like a roller coaster for some, but over the long term, it has been an engine of growth, and this has certainly been true in the last four years as we’ve emerged from recession. There is a paradigm shift where you no longer just switch to fixed income ten years before retirement. With increased longevity, there is more time to build assets in a well-allocated portfolio and then turn that into retirement income,” Wimbish said.
The 401(k), Social Security and Role of Individuals
About half of all Americans surveyed view the 401(k) as the best retirement savings vehicle when asked to select from a list of options (52% among affluent; 49% among those with less than $250,000 in assets). Unsurprisingly, affluent Americans contribute a higher percentage of their salary (median=12%) to their 401(k) plan than those with less than $250,000 in assets (median=7%).
Affluent Americans expect Social Security to play a smaller role in retirement than those with less than $250,000 in assets, who expect those benefits to cover a higher median percentage of their monthly retirement income (median=20%, compared to 25%).
The two groups have similar expectations on the following aspects of retirement:
The majority assigned responsibility for funding retirement to the individual through saving and investment, followed by the employer though a pension and by the government through Social Security.
They expect to begin taking Social Security payments at the median age of 65.
Similarly among those not retired, the majority of affluent (78%) and those with less than $250,000 in assets (71%) believe they will have the option of delaying the age at which they begin taking Social Security so that they will receive higher payments.
Affluent women (45%) are more likely to be willing to take a reduction in their Social Security and/or Medicare benefits than women with less than $250,000 in assets (30%), but there is no such difference among the men in both groups (36% versus 37%).
Harris Interactive Inc. conducted telephone interviews with 1,800 U.S. adults ages 25 to 75 focusing on attitudes and behaviors around planning, saving and investing for retirement. The survey was fielded July 9 to September 7. More information about Wells Fargo’s retirement research is available on their website, https://www.wellsfargo.com/investing/retirement/.