SAN DIEGO–(BUSINESS WIRE)–Retirement solutions leader Finance of America Reverse (FAR) today announced the release of “Disconnected: Perceptions vs. Reality in Retirement Planning,” a new study from the Stanford Center on Longevity (SCL) that examines the challenges and concerns that retirees and pre-retirees face when planning for retirement. The report also suggests messages and interventions that practitioners and researchers can use to help anticipate and address these challenges. The study was made possible with the support of FAR and builds on FAR’s mission to help solve the retirement crisis in the United States through greater awareness of home equity solutions and indicates a need for more financial advice and retirement planning earlier in life.
The results of the study show that the majority of retirees and pre-retirees are not financially prepared for retirement and do not have enough savings to take full retirement at age 65. Among those surveyed, the median retirement savings was valued at $128,000 and more than half (55%) of respondents said their financial situation was fragile or they were just able to get by financially . Given that most financial advisors suggest spending no more than 4% per year of invested savings, this equates to just $5,120 per year that the majority of retirees could safely withdraw from their investments to supplement their savings. other sources of retirement income.
Among pre-retirees, almost half (46%) said they decide when to retire based on their age and not their target savings amount, while almost a third (30%) said they have no plan to decide when to retire, which could result in retirees not having enough income in their later years, especially at a time when their medical and long-term care expenses tend to rise.
The results also indicate that there is room to improve the resources that retirees and pre-retirees use to help make retirement planning decisions. According to the study, nearly three in four respondents (72%) rely on their own instincts when making retirement decisions, which is the only resource used by more than half of all respondents. Conversely, only 41% of respondents say they currently rely on a financial advisor to help them plan for retirement, and 60% of respondents said they should have done more planning than they do. did. The combination of these factors and the lack of planning earlier in life contribute to low confidence in the future financial prospects of retirees and pre-retirees, with only 10% of respondents feeling comfortable with their finances.
“So many Americans manage their finances on their own for years without any advance planning, only to find themselves ill-equipped for the surprises, frustrations and huge expenses of a 30-year retirement,” said Steve Vernon, consultant at SCL. and co-author of the report. “The invaluable insights from this survey illustrate how a multifaceted strategic approach centered on financial literacy and engagement, step-by-step expert guidance from wealth planners and advisors, and empowering messaging for retirees can really make all the difference in building a financially secure future. .”
The survey also reinforces the need for Americans to think about retirement planning more proactively and seek the advice of financial experts to help them achieve their future financial goals.
“The way we think about and plan for our retirement is going to require fundamental change. The accepted path of education, career and retirement at 65 ignores the real demographic and social changes taking place in our country,” said FAR President Kristen Sieffert. “We need to invest in unbiased education and in building a set of retirement tools that are as broad and diverse as the different paths people take in the second half of life.
Sieffert added:We live in a time of transition, marked by longer lifespans, rising housing and healthcare costs, more volatile markets, but also recall careers, lifelong education and a redefinition of life after 60. year. The insights from this study help inform our work with financial advisors and consumers, highlighting the importance of planning ahead and home equity as a central financial tool for new realities and possibilities in retirement.
Martha Deevy, Associate Director and Senior Researcher at SCL, said: “We look forward to continuing our vital work with the support of organizations like FAR so that more Americans are equipped with the tools and support they need to create healthy, vibrant lives throughout retirement.
Main findings
In addition to highlighting aging Americans’ financial perceptions and aspirations for the future, the study results also highlighted several notable trends. Main takeaways include:
Lack of savings contributes to fragile financial outlook
-
The majority of pre-retirees and retirees surveyed reported having “modest” retirement savings, with the median value being $128,000. Therefore, the majority of pre-retirees will not have enough income to retire full-time at age 65 given their level of pre-retirement spending.
-
Only 10% of respondents say they feel very comfortable with their finances.
-
55% of those surveyed say they are fragile or only able to get by financially.
Professional advice is key to improving retirement planning decisions
-
60% of respondents believe they should have done more planning than they did, while almost 3 out of 4 pre-retirees and retirees want to do more planning in the future.
-
72% of respondents said they rely on their own instincts to make retirement planning decisions; it is the only reported resource used by more than half of survey respondents.
-
Only 41% of respondents say they currently rely on a financial advisor to some degree to help them with their retirement strategies, with 45% saying they don’t use a financial advisor at all.
-
60% of retirees and 64% of pre-retirees said a financial professional would be extremely or very helpful in determining an investment strategy, while 57% and 61%, respectively, said professional advice would be helpful. useful for planning their retirement savings.
Retirement expectations do not match retirement plans
-
80% of respondents cited lifelong financial security, affordability of care/support and maintaining their preferred lifestyle in retirement as extremely important or very important to them.
-
81% of respondents viewed unique circumstances as a clear barrier to planning for retirement, while 74% cite life’s uncertainties.
-
46% of pre-retirees say they will base their decision to retire on their age rather than when they will reach a target savings amount.
-
30% of pre-retirees say they have no plan for deciding when to retire, although when and how to retire is one of the biggest decisions facing pre-retirees.
Download the full report here: disconnectedretirement.stanford.edu
Methodology
The Stanford Center on Longevity conducted this study with support from Finance of America Reverse. The study results incorporate research from multiple sources, including: a custom survey of 2,000 US retirees and pre-retirees between the ages of 50 and 74, conducted by Greenwald & Associates; in-depth interviews with 21 academics, industry experts and recent retirees; and a detailed review of relevant literature in the areas of financial planning and retirement.
About Finance of America Reverse
As a retirement solutions company and part of the Finance of America Companies (NYSE: FOA) family of companies, Finance of America Reverse is committed to giving people the tools they need to achieve independence. financial and getting to work in retirement. Through its team of licensed loan officers and network of lenders and wholesale partners, Finance of America Reverse offers home equity products and services designed to help older Americans include home equity in their plans. of retirement. The company is nationally licensed (NMLS #2285) and is a proud member of the National Reverse Mortgage Lenders Association (NRMLA).
For more information, please visit www.far.com or find us on Facebook, LinkedIn Where Twitter.
©2022 Finance of America Reverse LLC is licensed nationwide | Equal Opportunity Housing | NMLS ID # 2285 (www.nmls.consumeraccess.org) | 8023 63rd Place East, Suite 700 | Tulsa, Oklahoma 74133