How do people enter retirement and how are they managing their income?

In a tell-it-like-it-is presentation here at the annual Retirement Industry Conference, co-sponsored by LIMRA, LOMA and Society of Actuaries, retirees revealed that retirement is not always planned.

“I was forced out,” said one. Another said, “I thought you were supposed to retire at 65.” Another waited until all the “big expenses” (home, car, etc.) were paid off. Yet another retired when “work seemed to interrupt all the things I wanted to do.”

One day, one man realized he had just “had it,” so he retired.

The retirees told their stories in film clips shown by Eric Sondergeld, corporate vice president and director of retirement research at LIMRA International, Windsor, Conn. The clips came from six LIMRA/SOA focus groups in three cities. Participants were ages 60 to 72 and retired for two to 10 years. They had $50,000-$500,000 invested in employer-sponsored plans and total retirement savings of $100,000-$500,000 at retirement.

Most had a good sense of their living expenses, Sondergeld said. But their decision to retire often was made right before retirement. Significantly, “none had targets for how much to accumulate for a target retirement date.”

Also, only a minority had used a financial advisor to calculate their need.

“You just know when you’re ready,” said one retiree.

Some retirees did run numbers, but they did so without professional guidance. “You just sit down and figure it out,” said one.

But another claimed to have “planned and saved all along” and so felt “ready” when the time came. Many who made such calculations did so on a short-term basis, pointed out Anna Rappaport, a co-panelist and principal of Anna Rappaport Consulting, Chicago. That is, they figured how they could manage for the next three or four years but did not go beyond that, she said.

Most did find they now have more time to do things, said Sondergeld. However, they did not necessarily have targets for what they can afford to spend for activities, he said. Hence, one retiree overestimated living expenses, while another spent more on entertainment than expected.

“A lot of good things happen when people plan,” Sondergeld noted. “But even with some planning, the differences are huge.”

Where investing is concerned, the general feeling was that it is important to keep principal, Sondergeld said. Many retirees indicated they are trying to live on their investment earnings (in addition to Social Security and traditional pensions) at least until their early or mid-70s.

But none had a target level for assets in five years or at any other time in the future, he said.

When asked about key concerns, health care costs and the need for LTC topped the list, followed by investment risk, inflation, outliving resources and maintaining lifestyle. But they don’t think about systematic risk management where financial products are concerned, said Rappaport. “This is scary, especially in view of the shift from defined benefit plans into defined contribution plans,” she said.

This is evidenced in various retiree comments: “How can you plan for the unexpected?” asked one. “I hope I will have something to leave someone, because that means I did not run out,” said another. “The best thing to do is to die broke,” said a third, adding “my kids are fine.”

Where annuities are concerned, few have them and their understanding of the products is low, especially for immediate annuities, said Sondergeld, adding “most think annuitization is a bet and they do not want to bet against insurance companies.”

The research also uncovered what he described as “widespread distrust of financial advisors.” This is even though many have longstanding relationships with advisors, Sondergeld said. “There is room for change,” he added.

Most do track assets quarterly, noted Sondergeld, and they do reevaluate periodically. But they say they “just know” if they have to make a change, he said.

Despite their own lack of planning, a number seemed convinced that tomorrow’s retirees will need to plan. “Be careful,” cautioned one. “Stick to your plan,” said another. “Don’t wait until the last minute to plan for retirement,” said a fourth. “You need an awful lot of money to retire and feel safe,” said yet another.

Such findings can help in developing financial solutions for retirees, Rappaport maintained. The solutions should work for retirees and for their survivors, she added, noting the majority of survivors are women, many of them widows. “Remember the widows,” she said.