Retirement Asset Planning Retirement Income Planning

Read Between the Retirement Survey Headlines

I was recently looking at the results of one of the key word searches that I routinely perform, “retirement survey.” The first two, both of which are headlines of articles in widely-read publications, are as follows:

This was refreshing to see since survey results regarding confidence in one’s ability to comfortably retire tend to be negative for all age groups. The two headlines that I came across claim that both younger and older individuals are optimistic about retirement.

New York Life Survey

According to a recently-released New York Life survey cited in the “Younger Americans” article, 66% of Americans aged 30 to 35 think they will be in better shape for retirement than in previous years. Despite the fact that Millenials have the least amount saved for retirement, the article attributed their optimism to having time on their side.

Per the survey, 46% of Gen Xers are optimistic about retirement, with only 33% of boomers feeling the same way.

Ipsos/USA TODAY Survey

The finding that only 33% of boomers are optimistic about retirement contradicts an Ipsos/USA TODAY survey of 1,250 adults ages 45 – 65 conducted in mid-January that’s cited in the “Older Workers” article. According to the survey, 65%, or double the percentage of boomers in the New York Life survey, are “very or somewhat confident they’ll have enough money to hold them through their golden years.”

The boomers’ optimism prevails despite the fact that, according to the USA Today article, (a) 27% surveyed have no retirement savings or investments and 22% have less than $100,000 and (b) nearly 50% believe they will need at least $500,000 to be comfortable and approximately 25% say they will need at least $1 million.

Misplaced Optimism?

Millenials’ and boomer’s optimism about retirement is fueled by the stock market’s meteoric ascent since March, 2009. The Dow Jones Industrial Average (DJIA) has increased by over 14,000 points, or 220%, in the eight ensuing years. Both groups have been mesmerized by, and have taken for granted, the DJIA’s recent track record. Seven out of the last eight years have seen positive performances of between 5.5% and 26.5%, with the losing year (2015) experiencing a decline of just 2.2%.

While Millenials’ optimism is understandable due to the fact that they have time on their side, I would have hoped that boomers’ retirement outlook would be more cautious. The overheated and overinflated stock market is a potential perfect storm for a repeat of the 2007 – 2009 stock market decline of 52%.

Have boomers forgotten about all of the individuals who were getting ready to retire in 2008 and 2009 who were instead forced to postpone their plans? The scenarios that will eventually play out could be very ugly for many given the group’s widespread lack of adequate savings relative to their expected needs.

I know for a fact that a lot of pre-retiree and retired boomers were spooked by the downturn eight years ago. Many have reallocated a portion of their savings into fixed income annuities. Survey after survey shows that those who have implemented this strategy are more relaxed, knowing that they will receive sustainable lifetime income beginning at a specified age – no matter how the stock market performs.  Perhaps these are the same people who responded to the Ipsos/USA TODAY survey.

By Robert Klein

Robert Klein, CPA, PFS, CFP®, RICP®, CLTC® is the founder and president of Retirement Income Center in Newport Beach, California. Bob is also the sole proprietor of Robert Klein, CPA. Bob applies his unique background, experience, expertise, and specialization in tax-sensitive retirement income planning strategies to optimize the longevity of his clients’ after-tax retirement income and assets. He does this as an independent financial advisor using customized holistic planning solutions based on each client’s needs and personality.