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Pre-Retirees, Retirees Have Different Ideas About Life After Work

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Survey results released Thursday by ING U.S. found that pre-retirees may be in for a rude awakening when they stop working. Although just 8% said they expect to have a lower standard of living in retirement than they do currently, 33% of retired respondents said they’ve had to cut back now that they aren’t working.

In a separate survey conducted online by ING in June, 80% of respondents said they would rather tighten their purse strings now to guarantee income in retirement. Almost 40% still expected to run out of money in retirement. That might not be very surprising, though, considering over a third of respondents think they can retire comfortably with $500,000.

ING surveyed 850 adults over age 30 for the phone poll in early June. The online poll gathered responses from about 2,400 consumers in mid-June and early July. Results from both surveys were released simultaneously.

ING found that advisors were a significant factor in respondents’ confidence. Almost 90% of respondents who work with an advisor said they’ve calculate what their current savings mean for their monthly income in retirement, compared to 59% of those without an advisor. While 37% of respondents thought it likely that they’d run out of money in retirement, among those without an advisor, 41% had the same fear.

“Don’t get me wrong; change is good and we all hope to get to that point at some time, but without some help, a retiree can easily get thrown off course,” Rich Linton, president of individual markets for ING U.S., said in a presentation discussing the surveys’ results.

One of the greatest obstacles to retirement planning is inertia, Linton said. “Retirement planning is complicated, it’s not an immediate need for me today, or frankly, it’s not interesting to an individual so they put it off,” he said.

An advisor’s value starts, then, with helping investors get over those obstacles, he added. One way for advisors to do that, according to Linton, is to help frame retirement in a way that makes it tangible and relevant to today.

Linton said that retirement savings are not one goal, but three: “It’s about understanding your needs, your wants and your wishes.”

He stressed that advisors should focus on life stages to help frame retirement planning. For example, a younger client may have student debt they’re still paying off, and may need help seeing past those obligations to plan for retirement.

Rick Mason, president of corporate markets, addressed the role plan sponsors play in retirement planning. He said 12% of sponsors currently offer an income solution in their fund line-up, and that is expected to double over the next year. “It shows there’s an increase in focus on helping participants connect their savings to income,” Mason said.

He suggested applying some of the automatic features that have helped investors in the accumulation phase could benefit those in the decumulation phase as well.

“Employers are going to be increasingly involved in advancing retirement readiness in the work force, not just because employees are asking for it, but because employers are being increasingly looked at by policymakers to play a greater role.”

They also stand to benefit, though, because when employees aren’t ready to retire, it can drive up health care costs and keep older workers in positions instead of advancing younger workers.