Wednesday, November 6, 2013

Part Two Concerns for Boomers in Retirement The good news

The good news from the survey is:

New retirees and those nearing retirement are looking forward to their “bonus years.” They see life in retirement as filled with opportunity and a chance to enjoy a Second Act. However, they don’t know exactly what to expect during, or how to successfully manage, a long, complex and ever-changing retirement. 
These findings suggest people would benefit from at least six things:

  • A better understanding of the issues critical to retirement, risks they face and what they need to prepare for
  • A clear definition of their goals and what is most important to them in retirement
  • Knowledge of potential trade-offs they must consider
  • An ability to examine various scenarios and the potential outcomes of decisions they are being asked to make
  • A plan of action that puts all their resources to work to help them to live their very best lives in retirement
  • An ability to correct course when circumstances warrant

In short, we believe people want and need to know more about their retirement years before they are upon them, to gain greater clarity about what they want to achieve, and to understand what is possible in this stage of life

The other interesting and I think good news is that today’s priority for retirees is achieving peace of mind

In previous decades, “getting rich” and “retiring early” were often heralded as the ideal retirement plan. Today, pre-retirees and retirees are more than seven times more likely to say their financial goal is “saving enough to have financial peace of mind” versus “accumulating as much wealth as possible” 

The new focus on peace of mind is likely driven by a number of converging forces, including:

  • The financial wake-up call of the recent recession, which exposed the dangers and risks of aggressive investment strategies.
  • The movement of the boomer generation from their  accumulation years into their retirement decumulation  years — when they are seeking to responsibly manage  savings and income to last throughout retirement.
  • Increasing life expectancy, creating greater uncertainty regarding how much money will be needed

Retirement Peace of Mind Index
An index to measure the current level of national retirement peace of mind was calculated from responses to the following survey questions: 

  1. I feel content and comfortable about how I will spend my retirement years.
  2. I have many worries about what might happen during my retirement.
  3. Thinking about my retirement gives me feelings of security and stability.
  4. I feel anxious and uneasy about how I will support  myself and my family during retirement.
  5. I feel well prepared for whatever may happen during my retirement.

Based on averages of responses to these questions, the national “Retirement Peace of Mind Index” at the time of the survey was 5.3 on a scale of 1-10. Retirement peace of mind  varies by gender, wealth, and use of a financial advisor 

Four key elements of retirement peace of mind. The following four key elements help create retirement 
peace of mind:

  • Financial security: confidence in having sufficient resources for retirement.
  • Health optimization: confidence in having resources and reliable care to maintain health in retirement.
  • Family well-being, feeling assured that family members will be financially secure and can rely upon each other when needed.
  • Personal purpose: having meaningful retirement goals, faith/spirituality, social connections, and personal legacy

Overturning the three-legged stool 
Among previous generations, retirement preparation was very much like a three-legged stool. Retirement funds were expected to come from 
(1) government entitlement programs, such as Social Security and Medicare, 
(2) employer pensions, 
(3) personal savings and investments. 

The retirement plans of the “silent generation” (ages 68 to 88) reflect this expectation. This generation estimates that just 33% of their retirement funds come from personal savings. 

However, other generations are far less likely to feel they can count on government entitlement programs or employer defined benefit pensions. The boomer generation (ages 49 to 67) expects they will need to fund 41% of their retirement through personal savings and investments. 

Generation X (ages 37 to 48) expects to be personally responsible for half of their retirement funds

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