Data and Research October 29, 2018

Longevity Concerns Inform Education Opportunities

BMO Wealth Management U.S. says individuals should know to plan for living beyond the average life expectancy and what medical expenses to expect, among other things.

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Increased life expectancy among Americans—which currently stands at 76 years for men and 81 for women—has extended the average retirement period to 18 years, and it highlights the need for individuals to have a comprehensive plan for saving and investing, according to BMO Wealth Management U.S.

A survey of more than 500 Americans age 55 and older finds top concerns about a lengthy retirement are health care costs and quality of life (46%), being a burden on family members (45%), and running out of money during retirement (44%). Respondents identified their most significant investment and retirement issues as a desire to maximize retirement income (22%), fear of outliving their savings in retirement (21%), and the impact of long-term care costs on personal finances (19%).

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The survey also found spouses and partners often have different opinions about long-term financial goals. The discrepancy cited most frequently among couples was when and how much to save for the future (28%), followed by retirement goals (27%).

BMO notes that many Baby Boomers are remaining in the workforce longer in order to grow their retirement nest egg, meet retirement and estate planning goals and stay active, and says those worried about longevity may need to consider this as an option. As for the concern about outliving savings, the company says individuals should know to plan for living beyond the average life expectancy.

BMO adds that individuals need to know what medical expenses to expect. In addition, it points out that risk tolerance changes as individuals age and investments need to be managed with that in mind.

The full survey report, “The Aging Economy: Improving with Age,” may be downloaded from here.
Data and Research October 29, 2018

Individuals Not Seeking Help for the Hardest Retirement Concerns

A study found the top financial tasks individuals need help with include choosing when to retire, choosing appropriate investments and developing a strategy to withdraw from multiple accounts.

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Even when financial tasks are difficult, individuals often do not seek professional help, suggests a report from Hearts & Wallets.

The report, “Pain Points & Actions: Insights to Address Large Advice Gaps by Reaching Consumers with Unmet Needs,” is an insight module drawn from the latest survey of the more than 46,000 U.S. households in the Hearts & Wallets Investor Quantitative Database. Individuals in the study say a range of financial tasks are more relevant to them than six years ago. For retirees and pre-retirees (those within five years of retirement) 14 of 16 financial tasks have relevance to three-fourths of these groups. Two of the largest increases are “knowing how to find resources to plan financially in retirement” and “developing a strategy to withdraw from multiple accounts,” both up 9 percentage points since 2012.

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Accumulators (individuals still focused on working and saving) say 11 of 14 financial tasks are relevant to 90% this group, with the largest increases seen in “choosing investments” and “handling market volatility emotionally,” both up 11 percentage points since 2012. However, “choosing appropriate investments” is a top pain point for all individuals, including more than half (57%) of accumulators, 43% of pre-retirees, and nearly one-quarter (24%) of retirees.

For younger individuals, ages 28 to 39, the No. 1 advice gap for this group is “identifying what year I might stop working full-time.”

“Financial tasks like retirement planning are hard,” Laura Varas, CEO and founder of Hearts & Wallets says. “Consumers get confused or default to inertia because they don’t understand which solution out of the wide range of offerings in the marketplace fits their specific needs. Firms need to personalize products and advice so that consumers easily see what options are available to help them and don’t default to inertia.”

The findings can also inform plan sponsors and participants regarding the education retirement plan participants need.

Individuals not seeking help

Of the 59% of accumulators who have difficulty with retirement planning, including how much to save for retirement, only 16% have sought help. And among 39% of pre-retirees who have difficulty with developing a strategy to withdraw income from multiple accounts during retirement, only 11% have sought help.

For younger individuals, ages 28 to 39, only 3 out of 14 financial tasks have rates of seeking help above 20%.

Information about how to purchase the report is available here.

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