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Retirement Planning > Retirement Investing

Is a 2014 retirement survey a roadmap for growth in 2015?

By Lloyd Lofton

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The 2014 American College RICP® Retirement Income Literacy Survey was recently released and its stated goal was to determine whether retirees and pre-retirees have the knowledge they need to successfully plan for a financially secure retirement. And while there is quite a lot of useful and enlightening information in the report, which I will comment on shortly, there is one qualifier in the overview which I find troubling.

That qualifier is “With limited or no ability to earn additional money through work, this group must know how much they need to accumulate by the time they retire and know how to manage their money during retirement.”

Now what is troubling to me about this qualifier is the dated notion that people reach Social Security age of retirement and they are done earning money. This may not be what is actually happening in the marketplace. 

First the age for qualifying for full Social Security retirement has moved past the traditional age 65, pushing out past age 66 depending on your birth year, with the first 100 percent of Social Security being paid out at age 66, with the spouse qualifying for 50 percent, so if the male is turning 66 and his wife is 62 they would qualify for these benefits.

After full retirement qualification for Social Security you can earn as much as you want to without losing your Social Security, if this income falls under provisional income you may find some of your clients social security being taxed, up to 85 percent depending on where that additional income is coming from, see my previous article on this.

As reported in a US News and World Report article “The proportion of people age 65 and older in the workforce grew to 16.1 percent by 2010, up from 12.1 percent in 1990, according to a recent Census Bureau report. And the percentage of people between ages 65 and 69 who are working grew 9 percentage points to 30.8 percent in 2010.”

Second many households today have two incomes and in this Census Bureau report 54 percent of couples are working in a household. So to approach a prospect as if “his” or “her” retirement is the primary concern for the family may not be the most dynamic method to ensure their retirement years are manageable and meet their lifecycle issues.

If a male is turning 66 and his wife is say 62 their income may fluctuate over the next several years. He may continue to work for a couple of more years, many advisors are promoting the concept of working until age 70 to build the individual’s Social Security income while others promote file and suspend, have the spouse apply and then file for full Social Security when the spouse reaches full retirement age.

Some people will file for full retirement benefits when they reach 66 while the wife may continue to work for some time. Assets, resources and longevity issues all pay a role in proper planning.Some findings of particular interest:

  • There is a high level of false confidence about financial knowledge which appears to act as an obstacle to more effective planning.
  • Only one in four have a written retirement plan. Increasing this number can be

highly effective in increasing retirement income literacy and security.

  • While two-thirds of people ages 60-75 with investable assets of at least $100,000 have a financial advisor, the lack of knowledge here suggests that advisors have not done a good job in educating their clients.
  • A significant minority has never tried to figure out how much they need to accumulate to retire securely, and this is something important for older Americans to do. One of the keys to financial security in retirement is accumulating enough money to fund at least basic needs. Therefore it is striking that one in three have not even attempted a calculation of need.

While advisors can help their clients preserve their assets in retirement and develop strategies to improve retirement security as they approach retirement the one thing I get out this survey is that if you don’t have a prospect the changes are you will not be helping anyone.

During 1946 – 1965 92 percent of women who could have a baby did, the average had 4 children, 2x the previous birthrate. They hit every stage of life together over an 18 year period of time and will again hit every stage of life together throughout their retirement years.

So while this report has a lot of data and information to put together a successful marketing strategy for 2015 the number that stands out to me is two –

“While two-thirds of people ages 60-75 with investable assets of at least $100,000 have a financial advisor, the lack of knowledge here suggests that advisors have not done a good job in educating their clients.”

And –

“…it is striking that one in three have not even attempted a calculation of need.”

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