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February 15, 2019 at 02:53 PM
Running out of money is the No. 1 financial concern of clients planning for retirement, according to CPA financial planners in a new survey, the American Institute of CPAs reported Thursday.
Thirty percent of CPA planners said this, an improvement from the AICPA’s 2016 survey, in which 41% of planners listed it as a top concern.
“There’s been a relatively steady increase in asset values over the last few years,” Michael Landsberg, member of the AICPA personal financial planning executive committee, said in a statement. “This, in turn, has led to stronger client balance sheets and presumably increased confidence that their money will continue working for them well into retirement.
“Of course, all of this can change, which is why it is important to revisit asset allocation, make appropriate adjustments and ensure your savings and investments will be able to fund the lifestyle you envision in retirement.”
The AICPA conducted the online survey from Aug. 20 through Sept. 24, and received responses from 631 CPA financial planners.
Twenty-eight percent of CPA financial planners said their clients were most worried about maintaining their current lifestyle and spending level in retirement, and 18% about rising health care costs. Though a much lower source of concern, the latter result was seven percentage points higher than in 2016, perhaps not surprising given that medical costs are forecast to continue growing throughout 2019.
Forty-eight percent of clients have expressed concerns about outliving their money, according to the survey, though only 39% of planners shared their concerns. The report said this underscores the extent to which even well-positioned clients are stressed over the prospect of going broke in retirement.
Asked about the chief sources of client financial and emotional stress concerning outliving their money, 77% of respondents cited health care costs, 53% market fluctuations and 50% unexpected costs. Other causes for financial stress were lifestyle expenses, the possibility of being a financial burden on their relatives and the desire to leave an inheritance for their children.
“A sophisticated financial plan takes into account both the client’s financial and emotional concerns,” Andrea Millar, director of financial planning for the Association of International Certified Professional Accountants, said in the statement.
“To mitigate the fear of the unknown, CPA financial planners map out a wide range of future scenarios, establish long-term goals and work with their clients to ensure they have adequate coverage to cover the health care costs that may crop up in their retirement ahead.”
Longevity Complications
The AICPA noted that retirement becomes more complicated as clients age, even with adequate planning.
Fifty-seven percent of CPAs in the survey said they were seeing long-term care issues affecting their clients’ retirement planning more frequently than they did five years ago. Only 1% saw this issue crop up less often, and 42% said they had not seen a change.
Half of respondents had noted an increase in clients taking care of aging relatives, with only 3% saying there had been a decrease and 47% saying numbers were about the same as five years ago.
And 45% of CPAs cited diminished capacity as an issue affecting clients’ retirement planning more often than five years ago, compared with 3% less often and 53% about the same.
