Data & Research April 29, 2015

Number Expecting to Rely on Social Security Increasing

U.S. nonretirees are more likely to say Social Security will be a major source of income in their retirement than they have been at any point in the last 15 years, according to a Gallup poll.
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The current 36% of nonretirees expecting to heavily rely on Social Security is roughly 10 percentage points higher than a decade ago. Another 48% believe it will be a minor source. Fourteen percent do not expect Social Security to be a source of retirement funds for them at all.

There are not sufficient sample sizes in any given year’s sample of nonretirees to analyze yearly change. However, a comparison of combined data from the 2014-2015 surveys and combined data from the 2005-2006 surveys shows at least modest increases in expected reliance on Social Security among nonretirees in all age and income groups. Even among the youngest cohort (ages 18 to 34) the percentage expecting Social Security to be a major source of retirement income has doubled—from 13% in 2005-2006 to 26% in 2014-2015.

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Even as nonretirees increasingly expect to rely on Social Security in retirement, they are still most likely to name retirement investment accounts, such as 401(k) plans or individual retirement accounts (IRAs), as a major source of retirement funds. Each year Gallup has conducted the poll, 401(k) and other savings plans have topped the list.

Currently, 49% say such plans will be a major source, essentially unchanged from last year but up slightly from an average of 45% from 2009-2013. In 2001, as many as 58% of nonretired Americans expected to rely on 401(k)s or other retirement savings accounts as a major source of money in retirement. After 401(k) plans and Social Security, the next-most-common expected retirement funding sources are regular savings accounts and CDs (27%), work-sponsored pension plans (25%), part-time work (21%), home equity (21%), and individual stocks or stock mutual fund investments (20%).

In the past 15 years, there have been modest declines in the percentages of nonretirees expecting pension plans, home equity and individual stock investments to be major sources of retirement income. There have been modest increases in the percentages expecting to rely heavily on regular savings and part-time work.

Asked about their major sources of income, 59% of current retirees say Social Security is a major income source for them. Pension plans have consistently ranked second on the list of retirees’ major income sources, with 36% saying so this year. Retirement savings accounts like 401(k) plans and IRAs, and retirees’ home equity have typically been the third- or fourth-most-common sources. Currently, 25% of retirees name 401(k) plans as a major source and 16% list home equity.

These results are based on Gallup’s annual Economy and Personal Finance survey, conducted April 9-12, with 652 retirees and 363 retirees.

Data & Research April 29, 2015

Retirement the Top Investment Goal of Affluent

Nine in 10 affluent investors, defined as those with $250,000 or more in investable assets, say their most important investment goal is retirement related—50% intend to generate income and 41% want to accumulate savings for their golden years.
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Just 5% say creating a legacy for their heirs is a top priority.

Affluent investors are more likely than the general population to seek help from an adviser—60% versus 39%–and more than half of affluent investors first met with an adviser before age 44, rather than waiting until they approach retirement. Most affluent investors (57%) say their adviser is their most reliable source of financial information, compared with financial newspapers (23%) and websites (20%).

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“Advisers can offer individuals long-term perspective on investing and help them make smart decisions when they experience market volatility or major life changes, so they can stay on the path to a secure financial future,” says Kathie Andrade, executive vice president, head of Individual Advisory Services (IAS) at TIAA-CREF. “Retirement can sometimes last 20 or 30 years or more, so individuals need to strike the right balance between shorter-term financial priorities and long-term planning, to help ensure they’ll have income to last throughout their retirement.”

In times of market stress, investors with financial advisers were more likely than others to ride out the storm because their portfolio was prepared for volatility—53% versus 41%.

Nearly two-thirds of affluent investors claim to be bullish on the economy, and the most common investments within their portfolios are stocks (76%) and mutual funds (73%). Sixty-three percent believe stocks present the best opportunity for growing their wealth, while just 12% favor real estate.

While the wealthiest investors are more optimistic about the economy—70% of those with $5 million or more in assets believe the economy is strong, compared with 57% of those with less than $500,000—more male investors report being confident than do women, at 73% and 51%, respectively.

Among those with doubts, the biggest concern is losses due to market downturns, cited by 35%. Twenty-eight percent say geopolitical instability would likely make them feel less confident in the economy, while 24% cited market volatility and 17% said higher unemployment rates.

The 2015 TIAA-CREF Affluent Investor Barometer, conducted by an independent research firm, polled a nationwide sample of 1,242 randomly selected adults who are financial decisionmakers for their household and have at least $250,000 in investable assets.

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