Through focus groups, GfK found that the respondents were confident they would achieve their goal... RETIREMENT INCOME: Path to
Through focus groups, GfK found that the respondents were confident they would achieve their goals of maintaining an active and social lifestyle in retirement.
However, that confidence was tempered by concerns about maintaining good health and increasing health-care costs. On average, the respondents expected to spend 16% of their annual budget on health care.
“In all the optimism they expressed about looking foreword to retirement, there was always this nagging thought in the back of their minds,” said Nicholas W. Iadicicco, senior vice president at GfK.
Many respondents were concerned that they would spend more as a result of having more free time — especially because many envisioned the early years of their retirement as a period of exploration. On average, the respondents expected to spend 17% of their annual budget on travel and vacations.
Meanwhile, they expected that another 14% of their annual spending would go toward such material items as cars and boats, according to the report.
Some respondents anticipated having to downsize their home or relocate to an adult community in order to save on property maintenance, according to the report.
Financial advisers can address these issues with asset management tools tailored to clients and developing alternative strategies that take into account unexpected events such as the death of a spouse or a long-term health issue, according to the report.
“When engaging these people, it's not necessarily taboo to bring up the issue of health, and that needs to be factored in planning some way,” Mr. Iadicicco said.
The most common reasons for not using an adviser involved a lack of a perceived need, and skepticism that professional advisers could produce better returns than the respondents could produce for themselves.
“So many of these people haven't sought professional advice, and they're doing it on their own. They don't necessarily have a formal retirement plan,” Mr. Iadicicco said.
• Investible assets of $250,000 or more (investible assets were defined as including mutual funds, individual retirement accounts, certificates of deposit, stocks, bonds, cash, savings and all other liquid assets, but not any assets in real estate or business ventures, or in employer-sponsored 401(k) or 403(b) plans).
For these panelists, the ideal retirement would include a strong focus on family and friends. Their homes would serve as a focal point from which their plans would emanate.
It is clear that panelists' retirement years will be very different from the traditional view of the relaxed, sedentary retirement of their parents. Nearly all panelists across the four sessions said that they expected to lead active, fulfilling lives after leaving the work force.
They mentioned such activities as travel, sports, hobbies, entertainment, part-time work for personal pleasure rather than financial need, exercise programs and learning opportunities in order to be creative and keep mentally stimulated.
At least for these relatively affluent panelists, retirement won't be a time of austerity. They often talked about “living it up” and “traveling in style,” and being able to afford the better things in life, including cars, jewelry, eating out and renovating their homes.
Some said they expected to downsize from their current home. Others said they would go even further and move to adult communities to enjoy the camaraderie.
In addition, some said they were interested in buying a second home, particularly in a climate where they could escape the cold winter or hot summer months.
Those panelists who were asked said that they were confident that they would achieve their ideal retirement, both in terms of financial goals and maintaining good health.
• Most said they either did or would obtain recommendations from family members, friends or co-workers who are financially successful. They also said that they relied on other financial professionals for recommendations, such as accountants or lawyers.
• Belief that the best advisers manage only clients with significant assets, and they said they aren't likely to qualify, due to minimum-asset requirements.
• Assuming that respondents were to work with a financial professional, there is no clear consensus as to whether they would prefer to pay for advice based on a fee for assets under management or a commission based on transactions.
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