Retirement reset: Pre-retirees need help reevaluating lifetime income offerings

As perceptions of what retirement should look like continue to evolve, retirees are reevaluating their financial approaches and lifestyles, as nearly one in three (31%) retired investors expect to be less secure in retirement than their parents and grandparents were, according to new research from the Nationwide Retirement Institute.

“The picture of life after retirement has changed for many people as economic stressors continue to weigh on retired investors,” said Mike Morrone, Vice President of Nationwide Annuity Business Development. “Now is the time for advisors and financial professionals to check in with their clients and help them remain calm, nimble and informed in the face of continued economic headwinds, ensuring the plan they have in place continues to position them for a secure retirement.”

Here are some insights into top-of-mind financial concerns for retired investors and how advisors can help make their client’s ‘golden years’, golden again, said Morrone:

• Cutting Costs: Nearly one in four (39%) of retired investors are spending less on entertainment to meet financial commitments, and 34% are taking fewer trips or vacations.
• Intensified Decumulation:More than one in five (22%) retired investors are drawing more funds from their retirement accounts, accelerating the traditional decumulation stage.
• Day-To-Day Finances Spark Concern: More than one in five (22%) retirees worry about affording monthly bills.
• Staple Expenses Remain in Play:More than a third (34%) of financial advisors say their clients are planning to continue making mortgage payments in retirement.

We asked Morrone to share his insight and solutions to help those employees nearing retirement to better reevaluate their financial commitments:

Q: Why are retirees abandoning common practices traditionally seen in retirement/?

A: Surprisingly, our survey found some retirees are rethinking traditional retirement strategies. For example, 12% are moving away from the 70-80% spending rule (planning for 70-80% of pre-retirement income per year in retirement) and 11% are abandoning the 4% rule (withdrawing 4% of their retirement portfolio each year when retired). Instead, they are seeking advice and guidance from advisors to achieve financial security in retirement, being counseled on generating guaranteed income, prioritizing wants vs. needs and supplementing income by working in retirement.

Q: Why are everyday financial obligations a concern for retirees?

A: Many retired investors are grappling with financial challenges as inflation remains off-target, which may be exacerbating the debt some retirees are still carrying. With about one-quarter of retirees still paying off their mortgages and another quarter working to pay down credit card debt, retirees think they’ll be less financially secure than their parents and grandparents were in their retirements. This can lead to short-sighted decisions driven by emotion rather than sound financial principles, which is why it’s crucial for financial professionals to help guide their retiree clients through today’s economic environment, reinforcing the importance of sticking to long-term plans.

Q: In the wake of economic constraints, how are retired investors adjusting their priorities?

A: Our survey found that retired investors are reining in spending to make ends meet in the wake of economic constraints. Some retirees are cutting back on how often they enjoy activities like dining out, attending events, or traveling to see family and friends. As they look to adapt their lifestyle to their new retirement reality, many retirees are making hard choices about their day-to-day spending habits.

Q: As economic stressors continue to weigh on retired investors, how has the picture of life after retirement changed for many people?

A: For many retirees, the ideal picture of life in retirement included relaxation, travel and embracing hobbies they were too busy to previously enjoy – ideals they are now scaling back to make ends meet amid economic stressors. Reining in lifestyle spending often means making tough choices, and it can feel like a big sacrifice, but that doesn’t mean retirees can’t enjoy a quality life in retirement. This is where advisors or financial professionals can really help, building or updating their clients’ long-term strategies to help protect assets and achieve financial security.

Q: How can financial advisors guide clients toward retirement security?

A: Advisors are recognizing and acknowledging retirees’ desire to avoid making the wrong moves in retirement. By working with their clients to understand their goals and anxieties, they can provide tailored advice and recommend the right strategies – including a plan for generating guaranteed income. By helping their clients protect their savings and plan for income they won’t outlive, advisors can help retirees achieve financial stability, which makes it easier for them to consider opportunities to do the things they enjoy in retirement.

Related:  Delayed: 25% of pre-retirees push back retirement, 15% unsure if they’ll ever retire 

Q: How can employers guide employees toward retirement security?

A: The majority of today’s pre-retiree investors, defined as non-retired investors aged 55-65, agree that the norm of retiring at 65 doesn’t apply to them … In fact, four in 10 said they would continue working in retirement to supplement their income and more than a quarter plan to live frugally to fund their retirement goals. With employers focused on attracting and retaining employees in today’s labor market, this presents an opportunity to improve retirement plan offerings. Another Nationwide Retirement Institute survey found only about one-third of business owners say they currently work with a third-party administrator for employee retirement benefits or an employee benefits consultant – a gap that advisors can help close by bringing the right kind of benefits specialist to the table to help employers understand their options.