Having a formal retirement plan boosts confidence, preparedness

Pre-retirees and retirees (ages 55-75 with financial assets of $100,000-plus) who have a formal written retirement plan are more likely to feel more confident that they’re saving enough for retirement. And they’re more than twice as likely to feel very prepared for retirement than those without a plan, according to new study from the LIMRA Secure Retirement Institute.

“While three-quarters of pre-retirees and retirees have some kind of financial retirement plan, our study found only 16 percent have a formal written retirement plan,” noted Matthew Drinkwater, PhD., assistant vice president, LIMRA Secure Retirement Institute.  “Our research demonstrated that taking the time to create a formal written retirement plan — which involves a comprehensive discussion about goals, asset management and risk mitigation — often leads to better outcomes in retirement.”

The study, The Benefits of Retirement Planning, reveals a stark difference between those who have a formal written plan and those who don’t:

• Half of pre-retirees and retirees who have a formal written plan say they feel very prepared for retirement, compared with just 17 percent of those without one.

• Eighty percent of those with a formal written plan have estimated how many years their assets will last into retirement, nearly double of those who don’t have a formal written plan (42 percent)

• More than three quarters of pre-retirees and retirees who have a formal written plan (78 percent) have developed a specific plan for generating income from savings; only 38 percent of those without a formal written plan have done this planning.

“Strikingly, most pre-retirees and retirees we interviewed said they would not have been as financially successful without a formal written retirement plan, acknowledging their own lack of awareness and skill,” says Drinkwater. “Even the wealthier consumers said they found value in a formal plan, if only to review and vet their own ideas.”

The Institute found that pre-retirees and retirees who have formal written retirement plans are more likely to roll over and consolidate their assets within two years.  They are also more likely to convert a portion of their assets into an annuity within two years:

• Pre-retirees with formal written plans are twice as likely to convert a portion of their assets into guaranteed income (22 percent vs. 11 percent).

• Retirees with formal written plans are three times as likely to convert a portion of their assets into guaranteed income (25 percent vs. 8 percent).

“The results from this study clearly show the benefits of formal written retirement plans for both the clients and their advisors,” says Drinkwater.