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Retirement Planning > Retirement Investing

Most Middle-Income Boomers Feel Unprepared for Retirement: Survey

By Bernice Napach

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Ten years after the financial crisis began in 2007, almost two-thirds of middle income baby boomers feel they have not benefited from the economic recovery that followed and half of those boomers report having less savings now than before the crisis. That’s just one of many findings from a report released today by Bankers Life Center for a Secure Retirement.

(Related on ThinkAdvisor: 9 Years Later, Workers Still Recovering From Great Recession)

Financial advisors working with such clients should understand that they “have a consumer who is still cautious and likely to value a guarantee more than the promise of higher returns,” said Scott Goldberg, president of Bankers Life. “If you’re going to serve this market you’re going to have to have a full bag of tricks. They need holistic planning.”

Bankers Life surveyed 1,000 baby boomers, aged 52 to 70, with annual incomes between $30,000 and $100,000 and less than $1 million in investable assets. Some were already retired; others were a still working.

(Related on ThinkAdvisor: Retirement Is ‘Life’s Most Expensive Purchase’)

Only 31% of respondents feel well prepared for retirement, down from 41% before the financial crisis, and just over one-third expect a personally satisfying retirement, down from 44%, according to the survey, titled ”10 Years After the Crisis: Middle-Income Boomers Rebounding But Not Recovered.”

Perhaps that’s because close to half (48%) expect to keep working in retirement, full time or part time, compared to 35% before the financial crisis, or because more than two-thirds (68%) of middle-income boomers are worried about another financial crisis occurring in their lifetime.

Expectations for Work in Retirement. Source: Bankers Life

Also, just 34% of middle-income boomers expect to retire debt-free compared with 45% before the crisis; fewer (57%) feel confident about meeting their daily financial obligations in retirement, down from 65% before the crisis.

Not only are more middle income boomers expecting to work in retirement, but many are already cutting back on spending and adopting more defensive, conservative investments.

“There has been a mindset change since the crisis, and we’re seeing that now in the willingness to work, to re-evaluate expenses and the types of products and investments that retiring boomers are favoring,” said Goldberg.

According to the survey, 54% of middle-income boomers have reduced discretionary spending, 47% have cut back on recurring monthly expenses and 34% are giving less to family, friends or charities. Despite those changes, however, many survey respondents aren’t necessarily saving more.

Although 28% report building up an emergency fund and 17% report saving a larger percentage of their paycheck, 24% say they no longer save and 21% are saving a smaller percentage of their paycheck (19% reported no change in savings).

Expected Primary Source of Retirement Income. (Source: Bankers Life)

“This mantra of save, save, save is always good advice but for some it’s too late,” said Goldberg. “Working longer is really the answer, if you can. It allows you to defer taking withdrawals from your savings that can allow a nest egg to last much, much longer down the road.”

Changes in investment behavior, as in savings, were also mixed among survey respondents. Twenty-six percent have made no changes to their investments, but among those that have, 28% report becoming more conservative in their investments, 26% say they no longer invest and 18% regularly review or adjust their investments.

In addition, 10% have sought financial education, 8% are working with a financial professional and 7% report investing in products that protect principal such as annuities. Only 5% have become more aggressive (Note: the numbers add up to more than 100% because of rounding.)

“People aren’t chasing returns like they did before the financial crisis,” said Goldberg, noting the 20% growth in deferred annuities last year.

But despite changes in their investments, more middle-income boomers now (38%) expect to rely on Social Security as their principal source of income during retirement rather than their savings or earnings (34%). Before the financial crisis, the comparisons were reversed. Forty-three percent expected to rely on personal savings and earnings for most of their retirement income versus 30% relying on Social Security.

This lack of confidence in retirement savings creates a “great opportunity” for advisors serving the middle-income boomer market, said Goldberg.

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