Client Service December 6, 2016

Client Visions of Retirement Include Fears and Hopes

World travel is a classic goal cited among many workers envisioning their retirement, yet few of today’s retirees say they can afford such luxuries.
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According to a recent RBC Wealth Management poll, three in five Americans age 50 and older say world travel is an important retirement goal, but more than half express concern about the potentially prohibitive cost. 

“Everyone is worried about whether they will have saved enough to fund a comfortable retirement,” observes Tom Sagissor, president of RBC Wealth Management U.S. “The closer people get to retirement age, the more they begin to look at needs versus wants. Often times, because of fear, the needs win out, putting bigger dreams like a trip to Greece or Beijing on hold.”

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And yet, with the advent of the “global sharing economy,” the RBC research argues travel may be more within reach for the current generation of retirees than ever before. “Vacation home rental sites, local car sharing and even bike and sports equipment rental sites are making it easier for people to escape and explore new destinations for less,” the research explains. 

“More and more clients are coming to our advisers for help in learning how to use the ‘shared economy’ more strategically in retirement,” says Griffin Geisler, manager of the Wealth Center at RBC Wealth Management U.S. “While it’s a trend started namely by Millennials, Baby Boomers in or near retirement can certainly stand to benefit.”

Whatever a given worker’s aspirations are for retirement, the RBC poll makes it clear that early planning and a solid long-term savings commitment are absolutely essential for achieving challenging financial/retirement goals, such as world travel. 

Personal health is another major barrier that can get in the way of retirement goals, the poll results show. Nearly one third of Americans suggest their own personal health or a loved one’s health could likely prevent them from traveling abroad during retirement—roughly the same number who say the cost of medical insurance is already a burden. At the same time, 15% are concerned about their ability to maintain insurance coverage if they get sick or injured.

Additional findings and information are available at www.rbcwealthmanagement.com. 

Data & Research December 6, 2016

Interest Shown in Funding Emergency Savings Before Retirement

The majority of both DC plan participants and sponsors are interested in a proposal to fund emergency savings for participants before putting savings into the DC plan.
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Both workers and employers are interested in establishing an automatic emergency savings account that would work alongside a workplace defined contribution (DC) plan, according to LIMRA Secure Retirement Institute research.

The study was inspired by Harvard University Professor David Laibson’s remarks at the 2016 Retirement Industry Conference. Laibson proposed that an automatic emergency savings account could be funded up to a specific amount, after which time the money would automatically go into a retirement savings plan. This approach could help fund financial emergencies and prevent early withdrawals of retirement funds, which can come with penalties and threaten long-term retirement security.

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The Institute’s study finds two-thirds of workers are interested in having access to an automatic emergency savings account. The research also finds 89% of employers are interested in offering the account, with larger employers more likely to be very interested.

The survey results show that the concept of the automatic emergency savings account has wide appeal. Interest in the accounts was consistent across all household income levels and DC plan participation.

Results are based on a September 2016 survey of 801 workers with access to a DC plan through their current employer and an October 2016 survey of 1,095 DC plan sponsors with 10 or more employees.

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