When asked to detail what pieces of financial advice they would give their younger selves, a new survey finds that most retiree respondents said they would advise saving more and investing earlier.
In fact, 70% of respondents said so, according to EBRI’s Retiree Reflections Survey. Among the open-ended responses for what financial habits they would have changed during their working years, about 12% commented on their spending behavior during their working years, while 13% specifically noted modifying investment behavior relative to tax-deferred accounts and asset allocation.
Fielded from April 26 to May 8, 2022, the survey sought to understand use of a financial plan in retirement, financial advisor use and assistance, priorities in retirement, along with spending concerns, financial worries and reflections upon past financial decisions. The sample consisted of more than 1,100 American retirees between the ages of 55 and 80 with at least $50,000 in financial assets; approximately half of the respondents were in their 60s.
EBRI notes that respondents were qualified as retirees based on a two-part test: either they considered themselves “retired, not working” or “retired, working part time,” or they had an active labor market status but considered themselves retired from a primary career.
Overall, half of retirees (49%) agreed with the statement, “I wish I started planning earlier for retirement.” Retirees who had a financial plan, used a financial advisor to create the plan and had higher financial assets were less likely to agree with the statement.
Among those retirees who did not start working with their current advisor until near or after retirement, 57% said they could have benefited from speaking with an advisor earlier in their career.
Advisor Satisfaction
Retirees also seem to fare better when they have an advisor. According to EBRI’s findings, about 9 in 10 retirees who used a financial advice professional to create a financial plan were satisfied with their financial professional and felt the value they received from using an advisor outweighed the cost. The report does observe that high satisfaction rates may, in part, be due to sample selection as well as advisory relationship survivorship.
“Specifically, retirees with a plan and/or advisor were less likely to have financial regret, when measured as the desire to change past financial habits in order to improve their current financial situation,” writes Bridget Bearden, Research & Development Strategist at EBRI and author of the report.
Relative to the transition to retirement, retirees who worked with an advisor on their financial plan reported that the primary benefits were asset-allocation-related, including assistance in identifying their risk tolerance and help understanding how to turn their retirement savings into an income stream, the report notes.
Few retirees (25%) reported that their former employer offered financial planning assistance, which Bearden notes could potentially reflect a timing difference (the benefits were offered after their employment tenure) or an awareness gap, revealing a need for improved communication.
What’s more, many retirees reported that they don’t have a formal financial plan for retirement. Only 42% of respondents had both identified financial goals in retirement and developed a written financial plan. Retirees report various reasons for not identifying financial goals in retirement, including lack of knowledge, admitted procrastination and unexpected events that were competing priorities.
Many retirees also reported being unprepared for taxes in retirement. Nearly half of retirees (48%) did not understand how taxes would affect their retirement financial situation. Moreover, 38% said they are paying different taxes than expected. And of those who are paying different taxes than expected, 60% are paying more than expected.
Pre- and Post-Retirement Worries
When asked to reflect upon their preretirement financial worries, the responses varied widely. The concerns cited most often were not saving enough for retirement (42%), unexpected medical expenses (39%) and preventative health expenses (39%). For those who are in retirement, inflation was the most frequently cited financial concern, identified by 54% of retirees, followed by health care expenses at 36%.
Bearden notes that the key themes that emerged from the research include the importance of work effort in retirement identity, strong satisfaction among those who use financial advice professionals and significant concern regarding inflation.
