Retirees and pre-retirees are optimistic about their future, with 64% of them believing they’re on track to having the retirement they want—but only 40% of their advisors agree, according to a survey by Allspring Global Investments.
Moreover, retirees with an average age of 70 are the most confident of all in their knowledge of key retirement topics, with 54% of them thinking they’re highly knowledgeable about Social Security, 46% thinking they understand Medicare planning and 65% believing they’ve got personal finance covered, the survey found.
Not so their advisors: Only 10% would agree on the Social Security front, 8% on Medicare planning and 14% on personal finance.
Nate Miles, head of retirement at Allspring and co-author of the 21st annual retirement survey, said the gap between what people think they know and how an expert would assess their knowledge is completely understandable given that, in general, people retire only once in a lifetime.
“How much knowledge are you supposed to have about something that you’ve done only once versus an advisor who might do this 10 or 15 times a year?” he asked. “These are the same individuals who wouldn’t have enrolled in a retirement plan, or saved more, or invested in a diversified manner, if the system didn’t help them. Yet, when they hit 65, we’re asking them questions that require answers they don’t have, like how long will they live and how healthy will they be.”
In this latest survey, there were 1,515 participants with at least $200,000 in investable assets—752 near-retirees with an average age of 61 and 763 retirees with an average age of 70. This survey also collected responses from advisors for the first time—320 around the country with at least $5 million in assets under management.
The survey found 70% of retirees were satisfied with most aspects of their retirement, with 85% being happy with the timing of their retirement and 69% saying retirement turned out to be better than they expected. And they said their spending could drop 25% on average without impacting their happiness in retirement.
According to Miles, one of the biggest transitions retirees make is pivoting from an asset focus to an income focus.
“All of a sudden, they’re looking at what their monthly income is, not how their total assets are going up and down with the markets,” he said.
In fact, he continued, during the Global Financial Crisis, 97% of companies continued to pay dividends while the average portfolio dropped 40%. For those retirees focused on income, their monthly money experience wasn’t greatly affected, he said.
“It’s great to see people pivoting toward that income focus. People need to do that,” Miles said. “And there’s no way that getting high-quality advice from an advisor doesn’t improve outcomes for individuals.”
Of all the knowledge gaps to close, respondents said they needed the most help with one of the most basic things: financial budgeting.
“Financial budgeting is interesting because it’s not very glamorous, but people need help in that space. And I think advisors shouldn’t overlook that,” Miles said, adding that a granular understanding of how much a client is bringing in monthly and what exactly they’re spending it on is critical to understanding how much income they’ll need in retirement.
“We want to lean into the investment side, of course, but I think there are more simple needs that clients have that we’re overlooking,” he said. “There’s going to be an asset allocation—good, bad or indifferent, there’s going to be one. But great asset allocation can’t make up for bad spending decisions.”