New Research Shows Benefits of Focused Retirement Planning

According to projections made by the U.S. Census Bureau, the country is about to experience an explosion in the number of people facing the prospect of retirement. By 2030, at least 20 percent of the total population is expected to be age 65 or older. This means that retirement planning is poised to become a bigger part of life for more Americans than ever before.

With this coming tidal wave in mind, new research from LIMRA offers a full look at where the market for retirement planning services stands today, and how financial professionals looking to expand their business may be able to capitalize on trends. Like much of the financial services industry, retirement planning could see sweeping changes over the next several years as professionals look for new ways to build a client base and more effectively serve them.

“Most people have already done some basic planning for retirement.”

Survey results
In the course of their research, LIMRA determined that most people facing retirement had already done some level of planning on their own. Basic tasks like determining Social Security benefit eligibility and estimating retirement income were common. Around 75 percent of retirees and 67 percent of pre-retirees told LIMRA that they had already worked to estimate how much money they would be able to access in retirement. However, as the options became more complex or specific, more survey respondents seemed to report less participation in planning activities. Only 51 percent of retirees had calculated how much of their assets they would be able to spend after ceasing work. And less than half of this same group said they had developed a specific plan to generate income from their savings to use in retirement.

Of all the households interviewed for this study, more than half (56 percent) said they already work with a financial professional for assistance with investments and other plans. Of these, 58 percent said they used the services of a professional to develop a specific strategy for turning savings into income, and 46 percent used an advisor to estimate how many years their assets would last in retirement. However, just 15 percent used an advisor for the purpose of determining the amount of Social Security benefits at different ages. Only 11 percent used them for help with health care coverage.

Those who either don’t enlist a financial professional for help with retirement topics, or those who don’t have a financial professional at all, could be putting themselves at serious risk in saving and spending during a long, uncertain retirement. To determine retirement income or how long their assets will last, around a quarter simply guess the figure. LIMRA found that this behavior makes retirees less confident in their overall financial prospects. Only 30 percent of the “do-it-yourself” planners said they were confident in their ability to save enough money to last their entire retirement.

RetirementDeveloping a formal written retirement plan has been shown to boost savings and confidence.

The benefits of formal written plans
LIMRA’s research found that while most people have some rough idea of how they will handle spending and saving in retirement, only 16 percent of those surveyed had developed a formal written plan. An FWP, when created with the help of a financial professional, will help clients focus their goals and the strategies they use to attain them, paving the way for a high rate of success in managing their retirement finances. A 2015 Gallup poll found that 38 percent of all investors had a written plan in place to keep track of their goals. According to the data, many more nonretired investors used this method than just four years prior, and around half of them follow the plan very closely.

Somewhat surprisingly, LIMRA found that just 13 percent of respondents between 55 and 59 years of age had engaged in developing a written retirement plan in the last two years, with this total being even lower among those of retirement age. This means the development of a formal written retirement plan could present an untapped growth area for many financial advisors. Formal written plans are not only effective at helping clients manage their assets and income in retirement, but also make them more apt to continue working with a financial professional. LIMRA found 54 percent of those who purchased products or investments did so as part of their written plan, and made these purchases with the same financial professional.

Formal written plans have also been shown to increase client satisfaction with their retirement planning professional. Of those surveyed who had developed a plan with a financial professional, 93 percent said their advisor “offers products and services that can meet needs throughout retirement.” And 65 percent of that same group reported becoming more loyal to their financial professional since developing a written plan.

By offering a full range of retirement planning services, financial professionals can ensure a strong, lasting relationship with their clients.

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