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FPA Survey: Planners Report Few Changes to Clients' Retirement Plans

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Most clients of financial planners did not make significant changes to their retirement plans or lifestyles during the year past, according to a new report.

The Financial Planning Association, Washington, D.C., published this finding in a white paper titled 2011 Financial Adviser Retirement Income Planning Experiences, Strategies, and Recommendations Study. The annual survey, sponsored by Thornburg Securities Corp., identifies successful retirement planning strategies and their success.

Planners responding to the survey report that 76% of retired clients did not make significant changes to their employment plans or lifestyles in the past 12 months. Planners also report that 66% of their clients who plan to retire in the next five years did not make any significant changes.

These are both increases from the 2010 study in which planners reported that 60% of clients in or near retirement did not make changes in the previous year.

Of the 595 planners surveyed, three-fourths frequently or always use systematic withdrawal, 38% frequently or always use time-based segmentation, a third frequently or always use essential-versus-discretionary income approach and 23% frequently or always use a less formal strategy where clients mainly live on their pension or Social Security which may be  supplemented periodically.

Of these processes, research results show systematic withdrawal is the most effective in helping clients maintain retirement plans and lifestyle.

According to the study, planners always using the systematic withdrawal approach for generating sustainable retirement income were more likely to have less than five percent of their clients making a significant change. And 33% of planners who always use systematic withdrawal had 96% or more of their retired clients make no significant changes to their employment status or lifestyle during retirement.

Although 78% of survey respondents said they select a retirement income strategy and use products to implement that strategy, some planners seek a single product to accomplish successful retirement income planning. The respondents suggested the following improvements for retirement planning products:

Automated products—for example, a product that allows clients to automatically take income out of the fixed-income portion of the portfolio;

More transparent and affordable annuities—Planners say they want more annuities with no fees, no commissions, and low expenses;

More innovative LTCI/annuity products—Planners are looking for hybrids that offer enhanced payments for terminal illnesses and tax advantages typically associated with LTCI.

Additional research findings can download here.


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