A new 'retirement mindset is driving savings behavior
The image of an older couple strolling the beach is fast joining the "museum of retirement cliches," along with traditional approaches to retirement planning, a new study suggests.
A survey of 2,001 U.S. citizens, including 629 near-retirees and 1,372 retirees suggests that retirement is no longer about reaching a certain age but is more of a mindset, and American workers close to retirement are eagerly looking forward to the next chapter in their lives, according to the survey results from the Empower Institute.
In a new white paper, Rethink, Rewire, Retire, Empower reports that:
83% of pre-retirees said they expect to "live their best life" in retirement
83% said they would rather save more today so they don't have to cut back in retirement; and
81% said there are more job and career opportunities for people post-retirement.
Pre-retirees are also looking forward to describing themselves as explorers, travelers and volunteers, with 44% saying their top advice to their younger self would be to save enough to have fun, as well as for necessities. More than 60% of pre-retirees also report that they plan to continue to work or join the gig economy, citing freelancing and consulting as their top choice for work.
"People are no longer looking at retirement as the end of something, but rather the beginning of something new," notes Empower Retirement President and CEO Edmund Murphy Ill.
"This important shift has changed the way people save for retirement or what they now consider their second act."
Given the high expectations, Empower observes that it's not surprising that today's workers are starting their retirement planning earlier - on average at age 42 versus age 47 for those already retired.
And while two-thirds (67%) said they felt confident in their ability to plan for retirement, that sentiment apparently comes with a lot of friction. The results show that 65% of near retirees say planning for retirement feels like a part-time job, and roughly two-thirds of both retirees and pre-retirees feel overwhelmed by the options, saying that retirement planning is more complicated than it needs to be.
Also lurking is the fear of running out of money, a concern shared by more than half of respondents in both groups. By far the biggest worry is the impact of unforeseen expenses, such as medical bills or major home repairs, while confusion over when to start taking Social Security came in a close second. What’s more, half of all near retirees say they’re unsure how to maximize retirement savings.
As such, Empower emphasizes that financial advisors and plan sponsors have an opportunity to capitalize on these dynamics by positioning retirement savings as working toward a tangible goal. Financial advisors and plan sponsors will also need to “recalibrate” how they meet the needs of this diverse group.
“Like today’s retirees, those who serve them must be nimble, creative and comfortable with new technology that tailors planning to individuals in a holistic manner,” the paper states. As a result, financial advisors and plan sponsors will need to shift from being “all-knowing experts to performing a more cooperative role of mentorship that includes understanding how to mentor to a holistic life and financial plan.”
Among the planning tools that retirees and near retirees would like to see are:
apps and platforms that account for second careers;
more engaging presentation formats that help predict gaps in Social Security and Medicare, as well as how to handle unexpected bills;
investment products that assume an “agile” withdrawal from full-time work; and
user-friendly resources that guide consumers who want to do it themselves.
If your retirement mindset has shifted and you're ready to talk about your changing plans, the Robin S. Weingast & Associates team is here to help. Contact us today to set up a conversation about how your changing mindset translates to changing savings plans.
Thanks to the National Association of Plan Advisors.