Only 27% of Americans in a survey released Monday by TIAA said they were confident they would always feel financially secure, including during retirement, and just 35% were very confident they could maintain their lifestyle for as long as they lived.
Baby boomers and men overall were likelier than younger respondents and women to express confidence in these areas.
Various factors are sapping financial confidence among Americans, TIAA said in a statement: uncertainty about the future of social programs and market performance, concerns about unexpected expenses and losses, and fear of saving too little.
Keys to Financial Security
The survey identified several skills and practices that build confidence. Those who rated highly their ability to invest effectively were roughly three times as likely to express confidence in always being financially secure, including throughout retirement.
Long-term planning can also be a confidence builder. Those who said they had mastered this skill were at least twice as likely to feel confident.
The same with good savings habits. Twenty-three percent of respondents cited saving regularly as the top means of boosting financial security.
Millennials and Gen Xers in the survey were likelier to list savings behaviors and understanding debt as factors that build their confidence, while boomers were more likely to select investment diversification and working with a financial advisor as boosters.
The survey found that beyond saving, perhaps the most significant antidote to financial uncertainty was the presence of guaranteed lifetime income through a pension or annuity that secures monthly income for life. TIAA offers annuities.
Nearly all respondents said it was helpful to know how much income besides Social Security they could expect each month in retirement. More than four in five respondents with access to guaranteed income through a pension or income annuity reported an increase in confidence due to their guaranteed lifetime income.
“A major lesson of this survey is that effectively addressing uncertainties is key to feeling financially secure,” Lori Dickerson Fouché, CEO of TIAA Financial Solutions, said in a statement.
“The two best ways of reducing uncertain outcomes are by using financial products that guarantee lifetime income and getting the advice and building the skills needed to deal with adverse events.”
The 2019 TIAA Lifetime Income Survey was conducted by Greenwald & Associates in May and June via an online survey of 901 Americans between the ages of 25 and 73.
The survey found that many Americans are not acting to improve their financial confidence and situation. Some six in 10 respondents said they had not created a written financial plan for retirement.
Fifty-two percent reported that they had not saved as much as they should have in 2018, and 22% had saved “a lot less.” Sixty percent of Gen Xers saved less than enough, compared with only 26% of baby boomers, according to the survey.
Two in three respondents said they did not rely on a financial advisor to help them achieve their financial goals.
Events beyond people’s control are highly worrisome and detract from financial confidence. More than half of respondents were highly concerned about a big unexpected expense, a major medical expense and significant cuts to social programs.
Many also expressed concern about a major market decline or an increase in inflation.
Guaranteed Lifetime Income
Sixty-nine percent of respondents who participate in an employer-sponsored retirement plan cited guaranteed income for life as one of their top two goals for their retirement plan, and 45% said it was their top goal.
They were more likely to rank guaranteed lifetime income as one of their top two goals than keeping their savings safe regardless of market events, earning a competitive rate of return on their savings or saving a specific amount of money.
Why? Sixty percent said guaranteed lifetime income gave them a feeling of financial security, and 46% said it made saving for retirement easier.
“Employer-sponsored retirement plans that provide guaranteed lifetime income through in-plan annuities give workers saving for retirement a method for insulating themselves from risks, such as the impacts of stock market volatility, longevity risk and even cognitive decline,” Fouché said.
“Having monthly income that’s guaranteed for life creates certainty in people’s ability to fund their necessities and can lessen the impact and stress from unexpected expenses that are beyond their control.”
Although people value knowing how much income they will have in retirement and in guaranteed lifetime income, a lot of confusion exists around this topic, according to the survey.
One-third of respondents who had access to a retirement plan did not know whether their plan offered an investment menu option that guarantees lifetime income.
Among those who thought that guaranteed lifetime income was available in their plan, 35% incorrectly believed that mutual funds secured lifetime income, and 20% believed the same about target date funds.
Thirty-six percent of respondents reported that a financial advisor was their top source of information on achieving financial goals, and these expressed more confidence than respondents without a financial advisor in their ability to always be financially secure, never run out of money and maintain their lifestyle in retirement.
Forty-one percent said an advisor helped them determine the amount they needed to save. Among boomers, 54% said they relied on an advisor for information on achieving their financial goals, and 52% did so in determining their savings goals.
Eight in 10 workers said they were interested in wellness resources provided by their employer, with 59% expressing an interest in a one-on-one meeting with a financial advisor.