Retirees, Pre-Retirees Slowly Regaining Confidence: SOA

Pre-retirees were more likely to think they would have to work longer, the report found. Sixty-seven percent said they would have to do so, compared with just 23% of retirees who said they would have to go back to work.

Despite being largely in agreement that they need to do a better job managing their money, neither pre-retirees nor retirees were likely to say they needed more advice from a professional. Less than a third of pre-retirees and 22% of retirees said they needed more professional advice regarding saving and investing.

Rappaport (left) noted that the July survey did not ask respondents whether they were working with an advisor, so it’s unclear if those who said they don’t need more professional help are confident with their own skills or if they have a financial professional. However, an earlier SOA survey found that the percentage of retirees with a personal financial advisor increased between 2008 and 2009, remaining steady at 61% in 2011.

Inflation is the biggest retirement concern for both groups, although health care rated a close second. Furthermore, retirees and pre-retirees grew more concerned about those risks than they were in 2009. To combat these fears, the report found, more retirees and pre-retirees are planning to secure guaranteed lifetime income, but only about a quarter have taken steps to do so.

Despite being more concerned about risk than in previous years, SOA found retirees and pre-retirees were no more likely to have used risk management strategies than they ever have been. The strategies they do adopt tend to be short-term: eliminating debt, cutting spending or going back to work.

Regardless of whether they work with an advisor, retirees and pre-retirees have “too short of a planning horizon,” Rappaport said. “The risks they are most concerned about are inflation, health and long-term care. They should be more concerned with long-term issues, running out of money.”

Another major concern for people who haven’t accumulated a large amount of assets, Rappaport said, is that to continue working, they need to “keep their skills up to date, keep their contacts up to date: They need to position themselves to be able to work longer.”

Social Security is another area retirees and pre-retirees could do a better job in planning. “The majority of people still claim too early,” Rappaport said, noting that by claiming at age 70 instead of 62, retirees could increase their benefit amount by 75%. “They give up that income in earlier years,” she acknowledged, but for some people, that higher payout later may be worth it.