Pre-Retirees Can Correct Retirement Insecurities

Working with an adviser and performing key retirement planning activities improve pre-retirees’ outlooks, a study suggests.

Only 48% of U.S. pre-retirees (non-retired ages 55 to 70) believe they will be able to live the lifestyle they wish in retirement, according to LIMRA’s study, “The Pre-Retiree Market: Surveying the Landscape.” The study found three in 10 pre-retirees have not started any basic retirement planning. Looking at five retirement planning activities identified as critical for retirement, no single activity had been accomplished by the majority of pre-retirees surveyed.

“Pre-retirees are feeling insecure about their retirement future, in part because they have not yet taken the steps to plan for retirement,” said Matthew Drinkwater, LIMRA associate managing director of Retirement Research. “Our research indicates that retirement preparedness is strongly linked to the completion of key retirement planning activities like determining your income and expenses, calculating your assets and how long they will last, and identifying the things you want to do in retirement and how much they will cost.”

Similar to other LIMRA studies, this one found those who worked with advisers were twice as likely to have accomplished at least some planning activities, particularly the more complex aspects of planning, such as calculating future assets available in retirement and estimating how long those assets will last.

Only 15% of all pre-retirees have a formal written retirement plan. Even among pre-retiree households with higher incomes, just about half have such plans in place.  Meanwhile, 62% of pre-retirees working with an adviser have written retirement plans.

“[O]ur research shows that working with an adviser to plan for this major stage in life is not only wise but has measurable positive results on retirement planning,” Drinkwater said.

When asked to identify which services offered by advisers are most valuable, pre-retirees’ responses mirrored those of advisers surveyed by LIMRA earlier this year. Both agree that creating an income plan and minimizing the risk of running out of money are critically important. 

These results also align with findings from LIMRA’s study of recent deferred annuity buyers; the majority of recent deferred annuity buyers said the two most important reasons they bought an annuity were to facilitate retirement planning and to ensure their assets lasted throughout their and their spouses’ retirements. (See “Individuals Seek Guaranteed Income Outside Retirement Plans.”)

“The challenge for the retirement industry is to convince more pre-retirees that sound planning truly can boost the likelihood that they will live the lifestyles they have imagined. Some of these activities can be difficult, but they are essential—and help is available,” Drinkwater concluded.