Benefits April 29, 2013

The Price of Retirement Confidence? $500K

April 29, 2013 (PLANSPONSOR.com) - If there’s a magic number that helps people feel optimistic about a successful retirement, it’s half a million, according to Maritz Research.
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The survey of individuals nearing retirement and the recently retired found people with investment savings of $500,000 or more view their retirement prospects with much more optimism than those with less in savings. They are more optimistic about a number of satellite considerations around financial security: they feel more prepared to meet rising health care costs and confident about having enough money to last their retirement, and less concerned about having to work at some point during retirement.   

Slightly more than half of those nearing retirement (54%) who have less than $500,000 are concerned about having enough money to last through the retirement years, a larger percentage than those who have accumulated more substantial assets. Just 35% of those people who have $500,000 or more expressed concern that their assets would be inadequate to last through retirement.   

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That 19% difference stayed the same among the recently retired, with 39% of those with assets of less than $500,000 feeling concerned that their money would not last through retirement, and just 20% of those with more feeling that their assets would be adequate to fund retirement.   

Interestingly, 19% is just about the difference between the two sets of economic groups when it came to their belief about their ability to pay for health care expenses. Before retirement, fewer than half of those with lower balances (43%) felt prepared versus 61%—almost two thirds—of those with a higher balance expressing confidence in being prepared for the expenses of health care in retirement.

The survey also examined the financial planning behavior of pre- and post-retirees—whether people worked with an adviser before retirement, and if they continued working with that adviser after retirement. Nearly two-thirds of recent retirees surveyed work with a financial adviser, and of those that do, more than half (61%) established that relationship before retiring. When the survey was previously fielded in 2005, just 52% of recent retirees had already established an adviser relationship in advance of retirement.   

The number of people continuing their relationship with an adviser chosen before retirement also went up, from 76% in 2005, to 84% in 2012.   

Those nearing retirement consider saving and planning to be separate activities. While retirees who begin saving early hold nearly 60% of retirement assets, roughly 40% wait to begin planning for retirement until they are within 10 years, the survey found.  

Most of those surveyed believe that retirement is an outdated concept. About one-third (37%) of those nearing retirement age believe they will have to work during retirement, and about one-third (36%) of near retirees said they expect to delay retirement altogether.    

The Maritz Research Retirement Study was conducted in December and is based on responses from 1,000 individuals nationwide, ages 50 to 70, with at least $100,000 in retirement savings. The study included 500 recent retirees (retired within the past three years) and 500 near retirees (people who anticipate retiring within the next five years). A previous study was conducted in 2005.   

More information about Maritz is at http://www.maritzresearch.com.  

 

—Jill Cornfield 

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