While retirement savings is a leading concern for a majority of Americans, more immediate financial priorities is one barrier preventing life insurers and annuity companies from reaching prospects with retirement-related advice, products and services, according to a recent survey by Deloitte’s Center for Financial Services.
Deloitte’s survey of nearly 4,500 consumers from a wide range of age and income groups revealed five barriers creating a disconnect between financial institutions and consumers when it comes to retirement planning. We laid out these barriers in our previous article, including ineffective communications, lack of product awareness, mistrust, and a “do-it-myself” mentality, in addition to conflicting priorities.
Indeed, while saving for retirement was by far the most highly ranked financial goal — even among respondents who are years away from retiring — the most common reason for not being able to save for retirement is that other financial concerns get in the way, including paying off a mortgage, student loans and other debt, or saving for a child’s education.
As one respondent said, “Right now, I have more pressing ways to allocate my money.” This was particularly the case among the younger respondents.
The second most important financial priority, especially among older respondents, is saving money to pay health-care costs. This is not surprising, considering that 70 percent of those surveyed said they expect their medical expenses to increase during retirement. A smaller but not insignificant number of respondents listed a related concern — long-term care expenses — as a top-two priority as well.
Concern over medical costs not only undermines retirement security but also appears to discourage the retirement planning process itself. One-third of respondents within five years of retirement surveyed by Deloitte said that no matter how well they prepare, they are concerned that health-care and/or long-term care expenses could overwhelm their retirement savings and income goals. That percentage of doubters increases to 40 percent for those more than five years from retirement.
As a result of multiple, often conflicting financial concerns, the majority of individuals tend to deal with their financial priorities in a disjointed fashion. Indeed, only one in five of those surveyed by Deloitte say they address retirement savings and income needs as interconnected with other priorities.
This myopic focus on the most immediate financial priorities prevents many from seeing the bigger picture, and discourages them from considering and accounting for longer-term needs such as retirement.
In addition, a large segment of respondents is pessimistic about their ability to address long-term retirement needs even if they tried. This cynicism is clearly evident in the fact that many respondents believe a) they don’t expect to earn enough of a return on their investments to provide sufficient retirement income, and b) no matter how much they save, health-care costs will ultimately overwhelm their nest egg.