Data & Research October 20, 2015

PNC Survey: To Save for Retirement, the Affluent Check Their Rolodex

Most well-off Americans have found a steadier option than Social Security or pension: help from their networking circles.
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If networking is useful for finding a job, how about for achieving retirement readiness? To offset the loss of the pension and uncertainty over Social Security, Americans are looking to other means to ensure they save enough for retirement. Those other means may be people.

“Americans are taking retirement into their own hands and surrounding themselves with a network of people to help them plan,” says Celandra Deane-Bess, chair of the national practice group for retirement at PNC.” According to the bank’s study Perspectives on Retirement 2015, 93% of “successful savers” have formed a network of advisers, ranging from personal to professional, who help them make financial decisions for retirement—and be more confident those decisions are good.

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 This confidence is far from just friendly optimism. A cool 45% of those with “a very effective network” have saved, on average, hundreds of thousands more, the survey says. PNC defines “successful savers” as Americans ages 35 through 44 with at least $50,000 of investable assets and ages 45 through 75 with at least $100,000 of investable assets. The average retirement savings for both age groups is $800,000 vs. $510,000, based on whether the saver had or didn’t have such a network, the study says.

On the whole, savers enlist various types of advisers, including family, friends, employers, accountants and, of course, financial advisers. Of their top two recruits, their spouse/partner, selected by 32%, is mainly an encourager. Their financial adviser (41%) aids with “most important” activities such as creating a plan, providing specific expertise and suggesting investments.

 NEXT: What to keep in mind when forming a network

 

What’s important when creating a retirement advisory network is to be deliberate, Deane-Bess says. She recommends that the saver choose people he knows he can trust. Just because someone is a friend or a highly paid professional doesn’t necessarily make him a good prospect for a particular saver’s network. Also, the saver should capitalize on any available tools and resources, such as online retirement calculators—as these are part of his network, too, PNC says.

Beyond this, he should “plan for all circumstances” by thinking through different scenarios, and, ultimately, “take responsibility,” Deane-Bess says.

In other words, to get the most from a network, the saver must work the network.

Because a major reason to have the network in the first place is to get help with the financial decisions, 95% of the savers seek information to that end. The top three needs they expressed were: help with choosing investment vehicles (72%), organizing an investment portfolio (68%) and rebalancing a portfolio (67%).

The support makes a significant difference in savers’ confidence they will indeed save enough—90% vs. 70%. Age apparently does, too. Eighty-three percent of Baby Boomers surveyed are more confident they know how much they need to save ($1.16 million) than the 74% of Generation Xers who believe $1.48 million is the number. The most confident are those who have at least $500,000 in investable assets, and are served by both a financial adviser and a strong retirement advisory network.

Pensions—here including defined contribution (DC) plans—and Social Security were still in the equation—when confident savers projected how much they expect to store up for retirement, 48% calculated the numbers based on those benefits. Yet, a combined 59% arrived at their amount based on their adviser’s help (33%) or an online retirement calculator (26%).

The Perspectives of Retirement Survey was conducted online, July 17 through 26, among 1,025 American adults representing a cross section of successful savers aged 35 through 75. About 20% of those surveyed were retired.

More information about the survey may be found here.

Data & Research October 20, 2015

Advice and Savings Conundrum Can Hamper Retirement

The perceived cost of advice can prevent Americans actually seeking it.
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Nearly half of Americans (45%) believe they need at least $50,000 in savings to warrant financial advice, according to TIAA-CREF’s fourth annual Advice Matters survey. The anxiety over the cost of access to financial advice is widespread, and 63% of survey respondents who have never received professional financial advice said lack of funds was the reason.

However, the survey also found that respondents who have met with an adviser are significantly more confident in their retirement savings plan than those who have not (78% versus 43%)—a strong motivation for Americans to seek financial advice regardless of how much they have saved.

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Everyone has a financial goal—paying off student loans, purchasing a new home or making sure loved ones are taken care of—notes Kathie Andrade, executive vice president and president, Individual Advisory Services at TIAA-CREF. Financial advice benefits everyone, no matter where they are in their savings journey, because engaging an adviser makes it more possible to meet goals.

Advisers help people stay on track and adjust when needed, Andrade points out. Positive financial behaviors of respondents who have received professional financial advice include: changing their asset allocation in their retirement plan (37%), increasing the amount set aside in savings (36%), decreasing spending (29%), monitoring savings more frequently (32%) and establishing a plan for paying off loans or managing debt (28%).

NEXT: When it comes to men, women and advice—a stark difference

Gender plays a significant role in who seeks and gets financial advice. Though 49% of all respondents report they have received financial advice, more men (56%) than women (43%) have reached out to an adviser. Women who have not received professional financial advice also are more likely (41%) to say the primary reason that they haven’t worked with a financial adviser is that they don’t have enough money to invest, while only 30% of men say inadequate assets are the reason. Just 31% of women say they have calculated the amount of money they will need to live comfortably in retirement, while 50% of men have done so.

Gen Y respondents are the least likely to have received professional financial advice (42%) among all generations, but they also are the most interested in receiving advice in the future (83%). And considering 61% of Gen Y members think they will need 75% or less of their current income in retirement, financial advice may help them adjust their expectations and ensure their savings are adequate to support a retirement that could last 20 years or more.

Working with a financial adviser may also help Americans set an accurate target for retirement income. Survey respondents who have discussed retirement with an adviser are much more likely to run the numbers and calculate how much income they will need in retirement—79% versus only 32% who have not met with an adviser. Nearly all who have met with an adviser have talked about a plan for turning savings into monthly income upon retirement, and 58% have put that plan into action.

Although many experts recommend individuals target 70% to 100% of pre-retirement income to maintain their standard of living in retirement, 55% of respondents think they will need 75% or less of their current income in retirement. This could put these individuals at risk to outlive their savings.

NEXT: Debunking myths about financial advice

Another common misconception: Many believe financial advice is necessary only as retirement approaches. But survey respondents indicated that other life events may motivate them to pursue advice, such as receiving an inheritance (52%), preparing to purchase or sell a home (40%), a decrease in household income (32%), divorce (30%) or a promotion or increase in compensation (30%).

People often think that getting financial advice means sitting down in the same room with an adviser, and 88% of respondents report they find these face-to-face meetings valuable. But Americans also recognize that advice can be delivered effectively through other channels.

Seventy-nine percent rate tools and calculators as valuable, along with online articles (72%), brochures and other written materials (70%), videos (68%) and online meetings using a chat function (58%). Eighty-one percent say it would be helpful to get online financial advice specifically designed for their age group to ensure they have guaranteed income in retirement.

KRC Research surveyed 2,000 U.S. adults age 18 and older, who were not TIAA-CREF participants, between August 3 and August 10. The survey questions and responses did not reference or concern any TIAA-CREF product, service or client experience.

More data from the “Advice Matters” survey is on TIAA-CREF’s website. 

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