While the pandemic has caused financial distress among most Americans, a recent survey shows that those who have a financial advisor are more confident in their retirement prospects and have taken more steps towards financial security compared to those without one.
In fact, respondents with financial advisors are 45% more likely to invest and 25% more likely to have sufficient cash reserves than those without financial advisors. In addition, those who have a financial advisor are 30% more likely to believe their financial security will stay intact if markets fall than those without an advisor.
These findings were part of “2020 Financial Insights,” an Edelman Financial Engines survey of 2,000 U.S. adults 40-65 years of age with annual household income of at least $100,000. The poll was conducted Aug. 27–Sept. 1, 2020. Of the respondents, slightly more than half (53%) have a financial advisor, while a third of them have a fee-based RIA.
Retirement Fears
Surprisingly, only half of respondents (49%) believe they will ever be able to retire—and this is for households with an income of $100,000 or more. One possible reason is that a quarter (24%) of pre-retirees—including Baby Boomers, Gen X and older Millennials—say they have reduced the amount they’re saving for retirement.
And more than a quarter of respondents (26%) say they have withdrawn money from their retirement or savings accounts during the pandemic. Of those, nearly 4 in 10 (39%) gave money to help a family member or friend in need and more than half (51%) paid their own bills.
Consequently, respondents, on average, believe they will need to work at least six years longer than they had planned, due to the pandemic.
Saving and Investing
Another surprising finding for this income cohort is that 35% say they do not have enough in cash reserves, including 34% of those in their 40s, 43% of those in their 50s, and 25% of those ages 60 to 65. Most (78%) also say they wish they started saving earlier.
More than half (57%) say that they would panic if the value of their investments declined 30% to 50%.
In fact, many investors have shifted to lower-risk portfolios due to the pandemic, including 34% of those in their 40s, 22% of those in their 50s, and 21% of those ages 60-65.
“Our survey showed that retirement is by far the most commonly cited reason that Americans invest. It’s extremely troubling that the pandemic has caused so many to reduce their retirement savings rates, as this will only distance them from their goals,” says Ric Edelman, founder of Edelman Financial Engines.
“This study reinforces our views that while the economic crisis has rattled hard-working Americans, those with financial advisors feel more confident in their ability to achieve their financial goals,” Edelman emphasizes.
