Data & Research October 23, 2018

Picturing Life in Retirement Boosts Savings

When asked to think about their life in their 60s, 70s and 80s, people said retirement savings should be increased by 31%, Capital Group found in a survey.

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When people envision how they want to live in their retirement years, they are motivated to save more, Capital Group found in a survey of 1,022 American adults.

Half of the adults were asked to envision their life in their 60s, 70s and 80s. This group recommended saving 31% more of their paycheck than the other half, who were asked how much they wanted to save for retirement. For women and Millennials in the first group, the recommended savings was 40% to 50% more.

“When people think about their 60s, 70s, 80s and beyond, they overwhelmingly view that part of life as a time of freedom and independence compared to their 20s or 30s,” says Heather Lord, senior vice president and head of strategy and innovation at Capital Group. “Our survey reveals that people who envision the life they want in retirement recommend saving more of each paycheck in a 401(k) account. This simple insight—if you can picture your retirement, you can save for it—can help Americans secure the financial future they want in their later years.”

The survey also found that 58% believe they will enjoy a more positive retirement than that of their parents and older generations, primarily due to advances in health care, technological innovations and their financial situation.

However, they envision a different type of retirement than older generations, with only 11% thinking it will be a traditional retirement. Eighty percent believe that flexible and part-time jobs will support their retirement savings, and 79% think that Americans will need more opportunities to work, earn and save later in life.

Eighteen percent of Millennials said full- or part-time work will be important for their financial security in retirement, but only 9% of Baby Boomers and 14% of Gen Xers said the same.

Seventy-three percent think their 401(k) and individual retirement account (IRA) will be among their top three sources of financial security in their retirement. Sixty-three percent of Boomers include Social Security in that top three, but this is only true for 32% of Millennials and 43% of Gen Xers.

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Sixty percent of Boomers expect to be financially secure in their 60s, and 54% expect to be financially secure in their 80s.

By contrast, only 48% of Gen Xers expect to be financially secure in their 60s, and this drops to 41% for Millennials and 43% for Gen Xers as they envision their 80s and older.

“The financial services industry sometimes accentuates worries and guilt to get people to pay more attention to planning and saving for retirement,” Lord adds. “Fear doesn’t generally work. We believe that imagining one’s later years is a powerful exercise that helps drive increased average savings per paycheck for retirement.”
The Markets October 22, 2018

Advisers See Increased Interest in SRI

Seventy-nine percent are incorporating socially responsible investing into their practices, according to an Eaton Vance survey.

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Socially responsible investing (SRI) continues to be a key area of focus for financial advisers, according to an online survey of 618 advisers by Eaton Vance.

Seventy-nine percent have incorporated SRI into their practices, and among this group, 44% say it is an important part of their practice, up from 31% in the second quarter. Thirty-five percent said that clients’ interest in SRI is growing, and 60% said that it is an ongoing topic of discussion.

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“Responsible investing strategies allow advisers to take a more holistic approach to wealth management with their clients,” says Anthony Eames, director of responsible investing strategy at Calvert Research and Management, with which Eaton Vance collaborated on this research. “As responsible investing gains in popularity, there’s increased dialogue between advisers and their clients.”

Fifty-six percent of advisers said SRI is driving new business to their practices, yet only 35% said they are very well informed about the topic.

“We are working to bridge this information gap by offering advisers enhanced tools and educational programs,” Eames continues. “Offering a full suite of responsible investing solutions can be a key differentiator for advisers trying to deepen and expand their client relationships.”

Eighty-seven percent of advisers said a robust research program is important for environmental, social and governance (ESG) analysis, but 67% said it is difficult to obtain measurable, quantitative sustainability data from companies, and 54% said they do not understand the connection between ESG and financial performance.

Jessica Milano, director of ESG research for Calvert Research and Management, says there is a direct correlation between the two: “Calvert’s proprietary research process leverages multiple data sources to capture and analyze ESG factors that drive company financial performance over the long term. Data show that firms that optimize their ESG practices tend to be rewarded for their efforts, along with their shareholders.”

Ninety-three percent of advisers said that demonstrating the impact of ESG investments is important to them and their clients, and 82% said it is important to engage with company leadership to drive positive business and ESG outcomes.

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