Although many people retire without financial advice, leaving the workforce is still associated with higher levels of financial confidence and satisfaction.
In “Retirement Transitions in Four Countries,” a recent report by Valley Forge, Pa.-based Vanguard, one-in-three pre-retirees in the U.S., Canada, the UK and Australia were preparing to leave the workforce with no access to formal financial advice.
In the survey, two-thirds of the respondents reported having access to private sources of formal financial assistance through an advisor, a workplace retirement program or a financial institution, leaving one-third of individuals approaching retirement with only informal sources of help or no assistance at all.
U.S. respondents fared a little better, with 77 percent of retirees who left the workforce within the past 10 years able to access formal advice when approaching retirement, and 78 percent of pre-retirees planning to retire within the next 10 years utilizing formal assistance.
The most common reason for not accessing a financial advisor, cited by 54 percent of pre-retirees, was that traditional financial advice is viewed as prohibitively expensive. Many pre-retirees, 33 percent, claimed to have other sources of support that they used in lieu of an advisor, while another 29 percent reported that they did not find advisors trustworthy.
Yet, according to Vanguard, retirement nevertheless improved the financial satisfaction of respondents in all four countries.
The gap between levels of financial satisfaction between recent retirees and pre-retirees ranged from 12 to 26 percent, depending on the country. In the U.S., retirement boosted the financial confidence of respondents by 12 percent: while 63 percent of pre-retirees expressed confidence in their financial decisions, 75 percent of recent retirees said the same.
At the same time, retirement dropped financial anxiety among Americans: While 38 percent of the pre-retiree respondents reported feeling anxious about their financial situation, just 23 percent of recent retirees said the same.
The current crop of pre-retirees expects to work in retirement – pre-retirees were four times more likely to say that they’ll work during retirement than recent retirees.
When planning for retirement, most pre-retirees are focusing their efforts on timing when to claim of government pensions, establishing a retirement date, or generating retirement income. Fewer respondents were creating formal plans for retirement income or considering holistic financial planning.
When interacting with retirement programs and financial institutions, individuals are moving from traditional financial advisors and in-person advice to more digital solutions. Even recent U.S. retirees, a cohort mostly above age 60, were more likely to seek financial advice online than in-person.
Vanguard recommended a number of initiatives that could help close the “advice” gap – scalable advice made possible by technology, expanding the reach and capabilities of traditional advisors into a broader range of topics and services, and adding features like retirement income projections or retirement income defaults to workplace plans and platforms to make it easier for individuals to plan.
For the survey, 5,663 households headed by 55 to 75 year olds in the U.S., UK, Canada and Australia were surveyed in October and November of 2015. U.S. respondents had minimum assets of $50,000.