Retirement Trends Signal Opportunities

Research about individuals’ views about retirement and saving for retirement offer opportunities for retirement plan advisers.

Speaking at the National Tax-Sheltered Accounts Association (NTSAA) 2013 403(b) Summit, Nevin Adams, director of Education and External Relations at the Employee Benefit Research Institute (EBRI), and co-director of EBRI’s Center for Research on Retirement Income, noted that 65 has not been the normal retirement age in the U.S. for many years. Many retire at age 62 when they can get Social Security, but over the past 20 years, people say they are going to retire later, but few do, he pointed out. Many that plan on retiring later are forced out by job loss or disability.

EBRI’s Retirement Confidence Survey (see “Retirement Expectations Are Changing”) found 20% of individuals indicated they believe they need to save 20% to 29% of income to have a comfortable retirement. Adams said this is a good point with which to start a conversation with participants. In addition, 71% of individuals with multiple retirement accounts make decisions for each separately. This is another opportunity for advisers to help.

Adams added that the survey found one-fourth of individuals actively sought advice about saving for retirement, but many did not follow it, the number one reason being a lack of trust in advisers. However, those that used a financial adviser have done better with saving than others.

Vanguard’s “How America Saves” survey also revealed some opportunities for advisers (see “More Participants Seeking Managed Investments”). John Heywood, principal in Vanguard’s retail investor group in Valley Forge, Pennsylvania, noted the survey found that only one in five respondents defer 10% or more of their income for retirement savings.

He said opportunity areas are indicated by findings that automatic enrollment increases participation, but those participants typically have lower deferral rates, and that two-thirds of plans offer online advice, managed accounts or financial planning, but only about 5% of participants use these services. Heywood said there is a need for one-on-one, customized advice.

Citing various research from VALIC, Allianz and SunAmerica, Greg Garvin, executive vice president of Independent Distribution at VALIC in Houston, Texas, said 93% of pre-retirees fear a volatile market will affect their retirement, 97% think they should invest in guaranteed income products and 88% said they likely would invest in guaranteed income products. According to Garvin, this signals the need for the introduction of retirement readiness programs and guaranteed income products to plan sponsors.

In addition, he recommends advisers identify participant behavior and concerns, and use targeted communications to supplement one-on-one meetings.