I must have been clairvoyant when I wrote my last MarketWatch article, “10 keys to retiring on your terms.”
Key No. 4, “Commit Your Plan to Writing,” was the most significant finding of the 2013 Franklin Templeton Retirement Income Strategies and Expectations (RISE) survey that was released when my article was published.
The survey found that Americans working with a financial adviser are twice as happy and confident in their retirement income plans than those who don’t work with an adviser. Specifically, 90% of those working with a financial adviser are happy with their retirement income plan compared with 44% of those without an adviser. Furthermore, 87% of individuals working with advisers are confident in their plan versus 44% who aren’t affiliated with advisers.
Collaborating with a financial adviser on a written retirement income plan, in addition to providing a higher level of confidence of achieving retirement planning goals, helps you understand your plan and feel good about the process. If you feel good about the process, you’re more likely to be a willing participant and implement planning strategies that will help you enjoy a more fulfilling retirement.
Running out of money is much lower on the totem pole of top concerns of those working with advisers than those who aren’t. Sixty-one percent of respondents to an Allianz Life Insurance Company 2010 survey of over 3,000 people ages 44 to 75 said they feared depleting their retirement assets more than they feared death. Per the RISE survey, only 18% of those currently working with an adviser expect running out of money to be their top concern during retirement.
Inflation also causes less anxiety for clients of financial advisers. Seventy-one percent and 58% of pre-retirees and retirees, respectively, responding to a Society of Actuaries 2011 survey of 800 adults between 45 and 80 said they were either “very” or “somewhat” concerned about inflation risk. This is much greater than the 19% of the RISE survey respondents age 65 to 74 who expect inflation to be their top concern during retirement.
Given the fact that approximately three times as many respondents to the Allianz and Society of Actuaries surveys are more concerned about running out of money and inflation compared with the individuals who participated in the RISE survey, the next finding should be no surprise. The results of the RISE survey showed that those who have never worked with a financial adviser are more than three times as likely to indicate a significant degree of stress and anxiety about their retirement savings as those who currently work with an adviser.
The value of working with a financial adviser and having a written retirement income plan is reinforced by the numbers of individuals who retire voluntarily versus involuntarily. Per the RISE survey, 74% of those currently working with an adviser retired by choice. The MetLife Mature Market Institute “Transitioning into Retirement” 2012 study reveals a different picture. Approximately 40% of retirees retired because of circumstances beyond their control. Eighteen percent cited health reasons, 14% retired because they needed to, or were tired of working, and 6% retired because they were laid off and couldn’t find work. The 40% figure doesn’t include an additional 13% of respondents who gave “other” reasons for retiring, a portion of which may be assumed to be related to circumstances beyond their control.
While it’s possible that individuals working with financial advisers may end up retiring involuntarily, it’s clear that the presence of a written retirement income plan, together with implementation of recommended strategies, gives you a feeling of control over your financial destiny to the extent that it can be controlled. Given the fact that retirement income planning can be overwhelming, the knowledge that this area of one’s life is being professionally overseen is inarguably a major stress reducer. “We couldn’t have done this without you” is a phrase that I’ve personally heard on more than one occasion.
If you want to feel good and reduce your stress level, forget about eating healthy and exercising. Hire a retirement income planner and have him/her get to work on your retirement income plan.
DISCLOSURE: Bob Klein is a big believer in following a healthy lifestyle.
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.