Survey Finds Advisor-Less Participants Not Adequately Preparing for Retirement

New research identifies a significant gap between those who do and do not work with a financial advisor in relation to knowledge of investment and retirement income strategies.

As individuals prepare for retirement, they may want to take steps to make sure their assets are protected against potential economic downturns. They may also want strategies to eventually draw down money from retirement accounts in a way that avoids financial penalties.

But in examining Americans’ retirement preparation efforts, Voya Financial found that people who work with a professional are significantly more prepared for a range of financial decisions in retirement compared to those who go it alone.

The firm’s survey results find that a majority of individuals who do not work with a financial advisor fail to budget or make adjustments to their investments leading up to retirement. In fact, the results show that only 35% of individuals without an advisor plan to do so. By comparison, 76% of respondents who work with one plan to make adjustments as they approach retirement.

The findings further show that 40% of individuals who work with an advisor plan to adjust their investments with a focus on protecting their assets, compared with just 18% of those who do not work with one.

Moreover, 57% of people who work with an advisor feel “very prepared” when it comes to making decisions about withdrawals from a retirement plan in a way that avoids financial penalties from withdrawing too early or too late, compared with only 22% of those who do not have an advisor.

Advanced Budgeting

Many pre-retirees also reportedly don’t realize that budgeting can begin approximately 10 years before retirement. Perhaps even more concerning is that individuals without an advisor are postponing their budgeting process, sometimes until the same year they retire, Voya notes.

According to the findings, half of individuals who work with an advisor plan to learn more about calculating their expected monthly living expenses at least five years before their target retirement date. Yet only 39% of individuals who don’t work with an advisor plan to do so at that time. And nearly one in five (19%) advisor-less individuals plan to wait until the year they retire to calculate those expenses.

What’s more, 42% of individuals surveyed without an advisor don’t feel prepared at all about estimating their monthly income in retirement, while an overwhelming 94% of those respondents who work with one feel at least somewhat prepared when it comes to this decisionmaking.

“When asked what aspects of retirement they wish they had spent more time considering, the majority of retirees said calculating monthly expenses and estimating their retirement income,” notes James Nichols, senior vice president of Voya Financial’s Customer Solutions Group. “These are two areas where individuals working with an advisor feel far more prepared than those who had not, according to our research.”

 The findings are based on an online survey of 1,004 U.S. adults conducted Aug. 20-22, 2018, by Engine (formerly ORC International) for Voya Financial.

Add Your Comments

One Comment

  1. Bob Benish
    Posted November 30, 2018 at 12:41 pm | Permalink

    Interesting but not surprising results proving once again the true value of an advisor. I would add that budgeting should begin much earlier than 10 years before retirement. Financial Wellness needs to be recognized and practiced as early as possible — and Managing your Budget should be a reoccurring goal on everyone’s MUST DO list.

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