Data & Research October 25, 2012

More Worry About Affording Retirement

Nearly four in 10 adults say they are “not too” or “not at all” confident they will have enough income and assets for retirement.
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This figure, from a Pew Research Center study, is up from 25% in a report from late February and March of 2009. An analysis of both surveys also shows that concerns about retirement financing are now more heavily concentrated among younger and middle-age adults than those closer to retirement age—a major shift in the pattern that had prevailed at the end of the recession.

Among adults between ages 36 and 40, 53% say they are either “not too” or “not at all” confident that their income and assets with last through retirement. In contrast, only one-third (34%) of those ages 60 to 64 express similar concerns, as do 27% of 18- to 22-year-olds.

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In 2009, it was Baby Boomers between ages 51 and 55 who were the most concerned. Only 18% of those 36 to 40 years old were worried they would fall short financially after they retire—one-third of the share who express a similar concern today.

There are also differences among demographic groups, the poll found. College graduates are much more likely than those who have a high school diploma or less to express confidence in their retirement finances (71% vs. 53%). Among those who attended college but do not have a bachelor’s degree, six-in-10 are sure that they will be financially prepared for retirement.

Those with household incomes of $100,000 or more also are significantly more confident than those earning less than $50,000 that they will have the financial resources to live on in retirement (79% vs. 51%).

(Cont’d…)

The most recent Pew survey underscores the relationship between recession losses and worries about retirement finances. Fully 45% of adults ages 35 to 44 say they are financially “worse off” now than before the recession. Among this group, more than two-thirds (68%) say they are not confident they will have enough income and assets to last through retirement. Only 30% of those in this age group who say they are better off now than before the recession express similar worries.

During this decade of wild market swings, ownership of stocks and retirement accounts, such as 401(k) and thrift accounts, fell among most age groups. The declines were greatest among those ages 35 to 44. The proportion of adults in this age group who directly held stocks declined by nine percentage points from 2001 to 2010, with half of this drop occurring before 2007. In contrast, the share of adults 65 and older who directly held stocks declined only three percentage points from 2001 to 2010, from 21% to 18%.

The proportion of 35- to 44-year-olds who held stocks indirectly through retirement accounts also disproportionately fell by nine percentage points, about double the decline among those younger than 35 or between 45 and 54 years old (four percentage points for both groups).

As a consequence, those in the 35 to 44 age group have benefited less from the rapid increase in stock prices since 2009 because they were less likely than their older counterparts to own stock and retirement accounts.

The Pew report is based primarily on data from two different sources: Pew Research Center surveys and the federal Survey of Consumer Finances. Findings from the latest Pew Research survey are based on telephone interviews with a nationally representative sample of 2,508 adults conducted July 16 to 26, 2012. The full poll findings are here.

In Practice October 25, 2012

Americans Need Personalized Financial Advice

Individuals are more likely to implement a financial change when there is an explicit investment recommendation versus general guidance.
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A TIAA-CREF survey found that Americans need individualized advice, with one in five saying finding relevant financial advice is difficult. Of those, 51% said they do not know where to start looking, and 74% said they do not know which sources they can trust for financial advice.

The survey also found that the desire to seek advice and take action differs based on age, gender and other individualized factors.

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Respondents ages 18 to 34, or Gen Y, showed more interest in getting financial advice than any other age group surveyed. Four in 10 said they frequently look for financial advice. Gen Y also was more likely to report making changes after receiving advice, and nearly 60% said they are likely to use online tools to do so.

Women respondents were more likely than men to face challenges finding financial advice, the study found. Nearly half of women surveyed believe personalized, objective advice will cost more than they can afford, and more than one-third said they do not have the time to look for it. However, women were more likely than me to take action on advice received, with nearly 90% reporting they do at least some of the time.

According to the results, Baby Boomers were the most likely to report financial advice was very difficult to find. Furthermore, only one in three Boomers admitted they consistently act on the advice they receive.

“The fact that people are not consistently acting on the advice they receive come as no great surprise,” said James Nichols, senior managing director, advice and planning services at TIAA-CREF. “People are all too often inundated with information telling them to save more, cut costs and plan for retirement, but how you go about that differs for every person.”

The survey was conducted by KRC Research by phone among a national random sample of 1,006 adults ages 18 years and older nationwide between July 11 and July 17. For more information, click here.

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