Retirees are abandoning common habits traditionally associated with retirement
COLUMBUS, Ohio , July 8, 2024 /PRNewswire/ — As perceptions of what retirement should look like continue to change, retirees are reevaluating their financial approach and lifestyle.
Nearly one-third (31%) of retirees expect their retirement years to be less secure than their parents’ or grandparents’, according to Nationwide’s ninth annual Advisor Authority survey, conducted by the Nationwide Retirement Institute®.
This sense of insecurity among retirees is compounded by the fact that everyday financial obligations remain a concern: More than one in five retired investors (22%) worry about being able to cover their monthly bills.
Retirees reassess financial commitments
The transition to retirement life requires some important shifts, including prioritizing financial obligations. In addition to short-term financial obligations such as basic living expenses, long-term debt also weighs down on retirees, with 26% of retired investors still paying off a mortgage and 25% still paying off credit card debt.
While the majority of U.S. savers dream of a retirement life filled with leisure and travel, retired investors are facing financial constraints and adjusting their priorities to make ends meet: Nearly four in ten retired investors (39%) are cutting back on entertainment spending to meet financial obligations in today's economic environment, and more than a third (34%) are taking fewer trips or vacations.
And to compensate, 22% of retired investors are withdrawing more money from their retirement accounts, intensifying the traditional drawdown phase.
“As financial stressors continue to weigh on retirement investors, the picture of retirement is shifting for many,” said Mike Morrone, vice president of business development at Nationwide Annuities. “Now is the time for advisors and financial professionals to reach out to their clients to help them stay calm, agile and informed in the face of continued economic headwinds, and ensure the plans they have in place continue to provide the foundation for a secure retirement.”
Retired investors' strategies are diversifying
Bracing for economic headwinds, retirees are stepping up their planning: Nearly two-thirds (63%) of retired investors have a strategy in place to protect their assets from market risks, up from 54% last summer.
But these retirement plans are fundamentally different from those of past generations: Some retirees (12%) are abandoning the 70-80% spending rule (i.e., limiting annual retirement income to 70-80% of pre-retirement income), and 11% are ignoring the 4% rule (i.e., withdrawing 4% of their retirement portfolio each year upon retirement).
Retired investors are also beginning to discuss estate planning and wealth transfer with their heirs: Nearly one-third (32%) of retirees have discussed their end-of-life wishes (long-term care costs, funeral wishes, etc.), and 34% have discussed the financial details of their estate with their heirs.
Financial advisors guide clients to retirement security
Advisors are providing their clients with the guidance they need to achieve financial security in retirement, advising retired clients on how to generate guaranteed income (23%), prioritize wants and needs (21%) and supplement income as needed (16%).
Advisors are also helping investors plan for longer-term financial commitments such as mortgage repayments, with more than a third (34%) of advisors saying their clients plan to continue making payments into retirement.
With major wealth transfers underway, advisors are helping their clients and their heirs prepare. More than half (59%) of advisors say their clients are reviewing beneficiary designations to prepare heirs to transfer and manage their assets. An additional 54% say their clients are reviewing or creating estate planning documents, and 44% say they are building financial confidence and knowledge.
“Advisors know and appreciate investors' desire to avoid making mistakes in retirement,” Morrone said. “By understanding their clients' goals and fears and highlighting the value of different retirement solutions and products, such as annuities, advisors can help clients feel confident in their retirement planning while helping them protect their savings and plan for income they can earn over the course of a lifetime.”
For additional information about this survey data, check out the infographic.
Nationwide's ninth annual Advisor Empowerment Survey, conducted with support from the Nationwide Retirement Institute®, explores the key issues facing advisors, financial professionals and individual investors and the innovative approaches they need to succeed in today's complex marketplace.
Advisory Power: Methodology
The survey was conducted online in the U.S. by Harris Poll on behalf of Nationwide from January 8 to 23, 2024, among 2,346 investors ages 18 and older with investable assets (IA) of $10,000 or more, as well as 518 advisors and financial professionals. Investors included 391 “pre-retirees” between the ages of 55 and 65 who are not yet retired, 346 single women, and 726 married women.
Weighting: Raw data from advisors is unweighted and therefore only representative of individuals who completed the survey. Investor data is weighted by education, age, sex, race/ethnicity, region, marital status, household size, employment, household income, investable assets, and online propensity, as appropriate, to match actual demographics. To ensure the investor sample was representative, data was first weighted separately for those with $10,000-<$100,000 investable assets and those with $100,000+ investable assets, and then weighted/combined across investor groups. Data for the subset of non-retired pre-retirees ages 55-65 were weighted separately by education, age, sex, race/ethnicity, region, marital status, household size, employment, household income, and investable assets, as appropriate.
Respondents for this survey were selected from among people who agreed to participate in our surveys. Sampling precision for Harris Online Poll polls is measured using Bayesian confidence intervals. For this survey, sample data is accurate to within + 2.8 percentage points using a 95% confidence level. This confidence interval is wider among subsets of the population surveyed. Sample data for the subset of pre-retired, non-retired individuals ages 55-65 is accurate to within + 6.2 percentage points using a 95% confidence level.
All sample surveys and opinion polls, whether they use probability sampling or not, are subject to coverage error, error associated with non-response, errors associated with question wording and response options, post-survey weighting and adjustments, and multiple other sources of error that in most cases are impossible to quantify or estimate.
About the Harris Poll
The Harris Poll is one of the longest running surveys tracking public opinion, motivations and social sentiment in the United States since 1963 and is now part of Harris Insights & Analytics, a global consulting and market research firm delivering social intelligence for transformative times. We work with clients in three key areas: building corporate reputations for the 21st century, developing brand strategies and tracking performance, and winning organic media with PR research. Our mission is to provide insights and advice to help leaders make the best decisions possible. Learn more at www.theharrispoll.com.
About Nationwide
Nationwide, a Fortune 100 company headquartered in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by Standard & Poor's. An industry leader driven by customer-centric innovation, Nationwide offers a broad range of insurance and financial services products, including auto, commercial, home, farm and life insurance; public and private retirement plans; annuities, mutual funds, excess, surplus, specialty, surety, pet, motorcycle and boat insurance.
For more information, visit www.nationwide.com
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This material is not a recommendation to buy or sell any financial instrument or adopt any investment strategy, and investors should consult their own financial professional regarding their specific circumstances.
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Contact: Alessandra Moore
Bliss Group
212-840-1661
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Kristen Vasas Samson
Nationwide
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Source: National