Retirement is changing around the world and financial advice must change with it
Based on its findings from the three countries, retirement tech provider Smart sees 3 opportunities that could improve the future for retirement savers.
Attitudes about finances in retirement differ from country to country, but there are a few common themes that can be found. Among them are an emerging belief that retirement is no longer a one-time event but rather a series of stages, and many people around the world want help managing their retirement savings.
These findings are part of The Future of Global Retirement Report 2021 report by retirement technology provider Smart, which surveyed 6,772 adults in the United Kingdom, the United States and Australia about attitudes, concerns and preferences related to finances in retirement
United States retirement saving picture
The report described the U.S. retirement market as being in a state of transition, with only half of American workers having access to an employer-provided retirement plan. The SECURE Act, passed in late 2019, could change that by making it easier for small employers to join pooled employer plans (PEPs) to provide retirement savings options to their employees.
Digging deeper into the perceptions of savers, the report found more than half of Americans (54 percent) are aware of their retirement options, including 75 percent of those over age 55. This represents a far higher level of understanding than other regions, said the report. However, one-quarter of respondents indicated they don’t know where to go for advice, and about 40 percent said they have never received advice, a particularly worrisome statistic for those over age 55.
While financial advisors ranked highest among Americans as a source of advice about retirement savings, a large percentage of those surveyed said they expect to seek advice from their retirement plan provider. Thirty-four percent of respondents said they would seek the advice of a retirement savings provider, but only 9 percent valued their provider as their most useful source of information, indicating a clear gap between the advice savers want and what plan providers are giving to them, said the report.
Almost all of Americans (88 percent) see retirement as something other than a one-time event, with about half describing retirement as something that happens in stages. About one third of respondents said they expect to continue working part time even after they begin accessing retirement savings, while one in five expect to supplement retirement income with another form of investment. About one-third of American respondents indicated they expect to retire between the ages of 65 and 69, while 14 percent think they will start accessing retirement savings between age 60 and 64.
The report also found Americans are concerned about health care costs in retirement and the ability to afford day-to-day living expenses, while those 55 and older were more concerned about being able to live their desired lifestyle. About one in five respondents said they have no concerns at all about their retirement finances.
Two-thirds of American said they’d like to be involved in managing their finances in retirement with the help of an advisor, while 29 percent said they want to manage their finances by themselves and 10 percent wanted someone else to fully manage their finances.
What retirement saving looks like in the UK and Australia
In the United Kingdom, defined contribution plans are replacing defined benefit plans and new auto enrollment features have a large number of people saving for the first time ever, said the report. Two-thirds of Britons plan to retire in their 60s, but 16 percent say they have no retirement savings and nearly 40 percent indicated they don’t understand the options available to them at retirement. Almost half of U.K. respondents said they have never received retirement advice.
Australians are required to make mandatory contributions into citizens’ retirement accounts, however retirees are faced with complexity around how to spend their savings during retirement. Fifty-seven percent of Australians plan to retire in their 60s, but 21 percent of younger Australians think they will retire in their 70s.
3 opportunities that could help all retirement savers
Based on its findings from the three countries, Smart gleaned three opportunities that could improve the future for retirement savers.
Seek advice sooner than later. The survey uncovered that nearly half of those over the age of 55 have never received financial advice about retirement. Technology could help make financial advice more accessible for those who are discouraged from seeking advice due to the cost, said the report.
Seek advice for a life stage, not a single event. Only 16 percent of savers consider retirement to be a single event. Nearly half of people surveyed view retirement as a process and one-third plan to continue working into retirement. This means the financial needs of retirees are shifting, and the advice they require will change as well.
Savers want control and flexibility. Nearly three-quarters of those surveyed said they want at least some involvement in managing their finances for retirement. Half said being able to access their retirement online is crucial and 40 percent want to be able to change their income depending on circumstances while one-third want to be able to withdraw money on demand.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics.
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