6. Recent retirees are less optimistic
Recent retirees report higher anxiety and pessimism than those retired for more than 10 years, particularly around future health concerns. By some metrics, recent retirees are at a disadvantage, with more carrying debt than later retirees.
Action plan for advisors:
Ensure you better understand retiree goals and behaviors to keep pace with aging populations
Goals for spending, income and asset retention often change throughout the course of retirement—and so does their appetite for risk. Plans should be mapped out at the beginning of retirement and updated several times over the course of a multi-decade retirement.
Be mindful of the potential gender differences of women and men as they relate to retirement planning. Women are more cautious—they also live longer. Keep these differences in mind as you engage with and guide couples, individuals and plan participants of either gender.
The lack of traditional pension income for the next generations of retirees will be a game-changer. Most retirees won’t be able to live off of Social Security alone in the absence of pension income and will need to maximize the value of their entire retirement savings—principal and all—unless they are willing/able to make dramatic cuts in their retirement lifestyle.
That’s why it’s important to help clients and plan participants focus on their future retirement income goals and spending needs before retiring and close potential gaps during their accumulation stage. When they reach retirement, most retirees will need to spend from their assets to fund their living expenses.
With this increased focus on retirement income and decumulation comes a much more complicated set of challenges—retirees will need help and advisors and employers will need to help people make the transition from saving to sustainable spending.
With the confluence of declining pension incomes and longer lifespans, the strong retirement asset retention seen in this last generation of retirees will not likely be repeated for much longer. Future retirees will need a greater percentage of overall income generated from retirement assets—meaning nest eggs will need to work harder for longer. This is not inherently a bad thing, but it will require a more proactive and focused effort all around: improved savings rates and consistent investing, sound guidance and innovative investment solutions to manage risk and income needs.