Around the World, Pre-Retirees Lack Financial Planning Knowledge

Many people in the developed world say they do not understand financial planning and do not know where to turn for help with financial matters, according to a survey from the Hartford.

Research from The Hartford Financial Services Group, Inc., shows that more than a quarter (27.4%) of pre-retiree respondents in the U.S. say they do not know where to turn for financial advice compared with 26.9% in 2007 and 19% in 2006. In the U.K., the lack of confidence grew to 18.1% in 2008 from 15.9% in 2007 and 12.8% in 2006.

One in four Germans (24.7%) say they do not know where to turn for financial advice, up from 10.1% last year. In Japan, more than one in two (54.4%) people do not know where to go for financial advice, compared with 43.6% in 2007 and 37.8% in 2006.

Overwhelmingly, respondents had a low opinion about their level of financial planning knowledge. In Japan, 19 out of 20 people (96.4%) say they lack confidence in their financial planning knowledge, meaning they were only “somewhat,” “not too” or “not at all’ confident. That compares to South Korea (92.2%), Taiwan and Italy (85.8%), Australia (83.5%), the U.K. (81.9%), the U.S. (79.4%), and Germany (76.7%).

Anxiety over financial preparedness in retirement remains high, especially in Japan (88.8% in 2008), the U.S. (77%), Germany (72.8%) and the U.K. (68.6%), saying they have at least “some’ concerns or in many cases were “very’ or “extremely’ concerned about having enough money. In Japan, more than half (56.9%) of survey respondents report being “extremely’ or “very’ concerned.

Few people are confident that all sources of income for retirement will be sufficient. Nine in 10 people in Japan (93.9%), four out of five in the U.K. (85.9%) and Germany (79.1%), and three out of four people in the U.S. (74.6%) said they were “not too’ or “not at all’ confident.

Less of the Good Life

Millions of pre-retirees around the globe are thinking less about enjoying the good life in retirement and more about whether they will have the financial resources to meet even their basic necessities, according to the survey.

The research shows the number one financial concern for people age 45 and older is keeping up with daily expenses for food, shelter, and other basic needs such as health care, compared with last year, when the number one concern was having enough money to enjoy life. According to a press release, nearly three in five people in the U.K. (59.3%), Germany (56.3%) and Spain (54.1%), and nearly one in two people in the U.S. (49.7%) say they are worried about getting by on a daily basis in retirement.

Other concerns found by The Hartford include:

The ability to afford health care is an important financial concern in South Korea (23.1%), Italy (21.4%), Japan (19.4%), the U.S. (15.9%), and Germany (14%). Many people said they were concerned about declining health as they age, particularly in Spain (55.5%), Taiwan (33.6%), the U.K. (36.3%) and Italy (34.6%).

Having enough money to enjoy life was cited as a key concern in the U.K. (46.5%) and the U.S. (43.2%).

The potential to run out of money was listed as one of the least appealing aspects about retirement by respondents in South Korea (38.8%), Japan (34.5%), Australia (27.9%), Taiwan (27.3%) and the U.S. (27%).

The research also found people are increasingly describing themselves as being risk averse, the press release said. The most risk averse countries in the survey—meaning respondents described themselves as “fairly” or “completely” risk averse—were Germany (76.1%), Italy (67.4%), the U.K. (63.1%), Spain (61.7%), Japan (57.9%), Korea (54.8%), and Australia (52.4%).

In Germany (29.5%), Japan (26.1%), and the U.S. (22%), the greatest risk was perceived as the financial impact of a significant health care event or problem, while the greatest risk in retirement was identified as the loss of buying power to inflation in Spain (51%), Italy (47%), Germany (34.6%), and the U.K. and Taiwan (27.5%).

The survey polled 6,750 consumers in the U.S., U.K., Germany, Spain, Italy, Japan, South Korea, Taiwan, and Australia.