Underestimating Creates Need to Change Plans for Retirement

Establishing realistic expectations about life expectancy and the amount of money needed is key to a successful plan for retirement.

More than half of CPA financial planner clients who are planning for retirement underestimate either their own life expectancy (52%) or their joint life expectancy as a couple (57%), according to the American Institute of Certified Public Accountants (AICPA) Personal Financial Planning (PFP) Trends Survey.

In addition, CPA financial planners said 54% of their clients underestimated the total funds needed to retire, with 57% lowballing their potential expenses in retirement. More than three-fourths (76%) of planners said their client’s general over-spending contributed to changing their plan for retirement, with 29% naming it their number one reason.

Health care costs, including medical expenses and medical insurance, was the second most cited factor (72%), with 24% saying it was the number one reason clients had to change their plan for retirement. The other leading responses were poor initial estimates of retirement income or spending (68%), giving financial assistance to family members (52%), and additional travel (49%).

The survey asked CPA financial planners to rate their clients’ confidence during the recent market fluctuation on a scale of 1 to 5, (with 1 being the most fearful, 3 being neutral and 5 being the most confident). Established clients of CPA financial planners (3.6) were the most confident, followed closely by clients under 40 (3.5), and clients educated about markets (3.4). Conversely, those most fearful during the market turmoil were those who had newly retired (2.3) and clients approaching retirement age (2.4).

The survey included responses from 398 CPA financial planners, and was conducted from September 2 to 22.