Most Young Seniors Lack Financial Plan for Retirement, Thrivent Financial Survey Shows |
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Written by U.S. Insurance News
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Friday, 15 February 2008 |
“Do it yourself” is a great adage for weekend warriors looking to spruce up their home while controlling the costs of their home-improvement projects. It’s not necessarily a wise plan of action, however, for retirees and money management.
“Do it yourself” is a great adage for weekend warriors looking to spruce up their home while controlling the costs of their home-improvement projects.
It’s not necessarily a wise plan of action, however, for retirees and money management.
Minneapolis-based Thrivent Financial recently conducted a survey of 800 retired and near-retired Americans aged 60–74. The survey set out to measure the attitudes and readiness of older Americans as they approach and live in retirement.
The survey revealed that most lack a financial plan.
Of those who have retired, only 22 percent report working with a financial advisor during the first two years of retirement to discuss their spending and drawing on one’s savings. Of those who did work with an advisor, however, 95 percent found it valuable.
In addition, a majority of all those polled are naive about how much money they will need in retirement, and many don’t have an accurate assessment of their actual spending in retirement. Fifty-five percent of seniors are unsure of how much money they will need to last throughout their retirement. And 56 percent are off target for their monthly spending in retirement: 29 percent spend more, and 27 percent spend less than expected.
Mark Anema, vice president of accumulation and retirement income solutions for Thrivent Financial, observed, “This generation has taken a hands-off approach to saving and spending planning when in retirement. But the reality is that this generation can’t afford to take chances because they often don’t have the pension plan or other secure income their parents may have had to ensure they are not destitute in old age. The financial planning process doesn’t end at 65.”
Given their apparent lack of knowledge and preparation, those surveyed showed a carefree attitude toward their financial future. Sixty-one percent don’t worry or think about having enough money in retirement, and 62 percent are not anxious about the performance of their investments.
However, those attitudes don’t necessarily match up with their actions. Two-thirds are taking steps to reduce their spending in retirement, including the following:
- traveling less (cited by 37 percent of those polled)
- giving fewer or smaller gifts to family members (37 percent)
- shopping with coupons or at sales more often (35 percent)
- eating out less often (32 percent)
Other cost-saving measures mentioned include cutting down on entertaining, both at home and out of the home with friends; reducing household costs by growing food in the garden and using less electricity and gas; and giving less to charitable organizations.
Significantly, of those who are not yet retired, 32 percent had hoped to be at this point.
“Retirement should be a time to take advantage of everything life has to offer,” Anema said. “While it’s good to see that they aren’t overly stressed by financial matters, the fact is that some may have a false sense of confidence in the longevity of their savings, while others may be pinching pennies when they could be spending more time or money on the activities they enjoy.”
Upon retirement, Americans shift from saving for retirement to spending in retirement. While one might assume this is an easy transition, the survey shows otherwise. In fact, of those who are retired, the majority have miscalculated their monthly spending in retirement.
“It’s understandable that most people overlook the importance of the second phase of retirement planning and naturally assume that they will be able to manage their income in retirement,” Anema remarked. “But, with unknown factors like market performance, life expectancy, health issues, or changing personal needs and wants, a holistic plan for spending in retirement can help ensure that retirees are living their retirement vision to the fullest.”
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