Embed Size (px)
Citation preview
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
RICP® Retirement Income Literacy SurveyDavid Littell, Matt Greenwald, Jamie Hopkins
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Agenda
Why did we conduct the survey?What did we find?
What do we do with this information?
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Presenters
Jamie HopkinsAssociate Professor and Associate Director
of the NYLCRI at The American College
Matt Greenwald President of Greenwald & Associates
Dave Littell Professor and Director of the
NYLCRI at The American College
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
MissionElevate the retirement income planning knowledge of financial services professionals in order to improve retirement security for all Americans.
Current Priorities & InitiativesVideo Library: retirement.theamericancollege.edu Retirement Income Certified Professional® (RICP®)Thought Leadership and VisibilityRICP® Retirement Income Literacy Index
Jamie Hopkins, Esq, JD, MBA Dave Littell, JD, ChFC®, CFP®
Leadership
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Retirement Income Literacy Survey
• Good decisions mean a more secure retirement • Blanchett, “Alpha, Beta and now Gamma” 38% more income
• Social Security decisions/tax efficiency/minimizing sequence of return
• Inform consumer education
• Inform financial professionals
• Put a spotlight on retirement income literacy
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Comprehensive Survey
• Knowledge, behavior, and attitudinal questions - Retirement planning - Ability to maintain lifestyle - Income generation - Annuity and life insurance product knowledge - Social Security - Taxes - Housing - Life expectancy, inflation - Medical and long-term care planning
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Survey Methodology
• Respondents had to be ages 60-75 and have at least $100,000 in investable assets, not including their primary residence.
• Online survey was conducted between July 17-25, 2014.
• Sample size =1,019
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
0%% 1% 5%
13%
81%
A (91%-‐100%) B (81%-‐90%) C (71%-‐80%) D (61%-‐70%) F (60% or less)
Just 2 in 10 Americans surveyed pass the Retirement Literacy Quiz and only a tiny percentage receive a grade of B. No one gets an A.
Quiz Grade Based on Total Percentage of Questions Answered Correctly
Total (n=1,019)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
19% 12%
24% 23% 15%
6% 2%
Pass (61%-‐100%)
51%-‐60% 41%-‐50% 31%-‐40% 21%-‐30% 11%-‐20% 1%-‐10%
Fail: 81%
More than 2 in 10 fail drastically, responding correctly to 30% or less of the quiz questions.
Total Percentage of Questions in Quiz Answered Correctly Total (n=1,019)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Surprising Given…
• Limited to those with assets to manage in retirement
• Demonstrated engagement in own retirement planning - 2/3rds had calculated the cost of retirement
• Demonstrated basic financial literacy - 84% stock mutual fund safer than individual stock
- 90% on impact of inflation on purchasing power
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Income Basics • 3 in 10 knew that working longer or deferring Social
Security (2 years) is more effective than saving 3% more in the 5 years prior to retirement
• 3 in 10 understood the 4% withdrawal rule
• 43% understood that buying a life annuity with 20- 40% of a retirement portfolio can help ensure a basic level of spending throughout retirement
• 1 in 4 understand that 401(k) benefits are safe from the employer’s creditors
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Social Security• 23% understood what happens when the Social
Security system runs out of reserves
• 54% realize that benefits increase each year one delays up to age 70
• 53% know that it is best to wait until age 70 to claim Social Security if one is going to live to 90
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Investing in a Retirement Portfolio• Less than 4 in 10 know that a person should take the least amount
of investment risk right before they retire
• 35% knew that to maximize the withdrawal rate from a portfolio with 50-60% in equities was better than 25-35% or 90-100%
• 6 in 10 knew that a diversified portfolio of stocks provided better inflation protection than bonds or CDs
• Risk premium concepts - Lower rated bonds receive a higher yield (25%) - Small cap stocks receive highest average return over the long run (7%)
• The impact of changing interest rates on the value of a bond mutual fund (39%)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Annuity Product Knowledge• 6 in 10 do not know the answers to any of the annuity
product knowledge questions - Just 1 in 4 know that an annuity paying income of $1,000 a month is
generally going to be more expensive the younger the owner is when the payments begin.
- Only 13% respond correctly that a deferred variable annuity with guaranteed lifetime withdrawal benefits can pay income even if the investment account goes to zero.
- Similarly, just 13% are aware that the lifetime income payout rate for an immediate income annuity for a 65-year-old male today is roughly 6 to 7%.
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Tax Strategies• Nearly 7 in 10 are aware of RMDs at 70 1/2
• Did not understand common tax strategies - Only 20% knew that life insurance premiums can be withdrawn first
without income tax
- Only 36% knew that a lower than normal tax rate would be a good time to convert to a Roth IRA and
- Only 45% knew that those over 70 could continue to contribute to a Roth IRA if they were still working
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Retirement Risks• Inflation - Less than 4 in 10 know that the average life expectancy for a man at 65
is about 20 years
- More than 4 in 10 would be very likely to plan to make their money last with just a 10% chance of living to that age
• Long-term care - Just 1 in 4 understand that 70% of the population will need long-term
care at some point in their lives.
- Less than 2 in 10 know that Medicaid pays for the majority of long-term care expenses. Instead, the plurality believe it is paid for through private payments by individuals.
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
• Gender
• Age
• Assets
• Education
• Other
Demographic Characteristics
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Retirees likely to have and talk to advisor, more than pre-retirees
Do you currently have an ongoing relationship
with a professional financial advisor who helps
you with your finances or investments?
Retired (n=775), Not Retired (n=244)
How often do you talk with this professional financial
advisor, either in-person, by phone, or by email?
If have an advisor: Retired (n=527), Not Retired (n=144)
Yes 65%
No 35%
81%
16%
2%
5%
69%
16%
6%
*
Two or more 4mes a year
Once every year
Once every two years
Every three years or less
Re4red Not Re4red
Yes 59%
No 41%
Re#red:
Not Re#red:
* = Less than 0.5%
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Many feel knowledgeable about saving for a comfortable retirement
How knowledgeable would you say you (are when it comes/were when it came) to saving for a comfortable retirement?
Retired (n=775), Not Retired (n=244)
* = Less than 0.5%
10%
31%
16%
28%
8%
1% 2%
10%
24% 23%
34%
8%
1% *
Extremely knowledgeable
(7)
(6) (5) Moderately knowledgeable
(4)
(3) (2) Not at all knowledgeable
(1)
ReBred Not ReBred
Net Top 2: 42%
Net Middle 3: 55%
Net Bo3om 2: 3%
Net Top 2: 34%
Net Middle 3: 65%
Net Bo3om 2: 2%
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Over half of retirees feel they did a very good job of saving for retirement
How good of a job do you think you (are doing when it comes/did when it came) to saving for retirement?
Retired (n=775), Not Retired (n=244)
20%
33%
18% 21%
6% 1% 1%
14%
22% 19%
29%
11%
4% 1%
Excellent (7)
(6) (5) Moderately good (4)
(3) (2) Poor (1)
Re?red Not Re?red
Net Top 2: 52%
Net Middle 3: 45%
Net Bo3om 2: 3%
Net Middle 3: 59%
Net Bo3om 2: 5%
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
7% 13%
42%
30%
8%
Very ahead of schedule
Somewhat ahead of schedule
On track Somewhat behind schedule
Very behind schedule
Net Ahead of Schedule: 20%
Net Behind Schedule: 38%
But two in five pre-retirees feel behind schedule
When it comes to planning and saving for retirement, would you say that you are…?
If not retired (n=244)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
The cost of health care heads the list of retirement concerns, followed by cuts to Social Security and Medicare, running out of money is lowest
How concerned are you about each of the following in retirement?
Total (n=1,019)
27%
26%
16%
15%
18%
11%
8%
21%
15%
18%
15%
12%
17%
7%
48%
41%
34%
30%
29%
28%
16%
Cost of health care
Cuts to Social Security or Medicare
Paying for long-‐term care expenses
Impact of InflaGon
Changes in tax rates
VolaGlity in investment returns
Running out of money
Extremely concerned (7) (6)
Net Top 2 Concerned
33%
25%
14%
13%
16%
17%
9%
20%
16%
18%
18%
13%
14%
15%
53%
41%
32%
32%
29%
30%
24%
Cost of health care
Cuts to Social Security or Medicare
Paying for long-‐term care expenses
Impact of InflaGon
Changes in tax rates
VolaGlity in investment returns
Running out of money
Extremely concerned (7) (6)
Re/red (n=775)
Not Re/red (n=244)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Formal, written retirement plans are uncommon, but more common during retirement
Do you have a formal, comprehensive, written retirement plan?
Total (n=1,019)
Yes 30%
No 70%
Yes 20%
No 80%
Re#red (n=775)
Not Re#red (n=244)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Two-thirds have taken the time to figure out a savings goal for retirement.
Have /Did you (or your spouse/partner) ever try to figure how much money you
would need to have saved when you retired to live comfortably in retirement?
Total (n=1,019)
Yes 67%
No 33%
Yes 67%
No 33%
Re#red (n=775)
Not Re#red (n=244)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Despite attention to accumulating money, many fail to plan for other key aspects of their retirement
How much thought (have you given/did you give before you retired)
to each of the following aspects of starting retirement?
Total (n=1,019)
18%
17%
10%
7%
5%
20%
18%
21%
15%
8%
38%
35%
31%
22%
13%
What your budget (will/would) look like in re>rement
Where you (will/would) live in re>rement
How you (will/would) spend your >me in re>rement
How you (will/would) replace the meaning you receive from work
when you re>re
What impact re>rement (will/would) have on your rela>onship with
family and friends
A very great deal (7) (6)
13%
21%
16%
14%
9%
26%
17%
16%
15%
8%
39%
39%
32%
29%
16%
What your budget (will/would) look like in re>rement
Where you (will/would) live in re>rement
How you (will/would) spend your >me in re>rement
How you (will/would) replace the meaning you receive from work
when you re>re
What impact re>rement (will/would) have on your rela>onship with
family and friends
A very great deal (7) (6)
Re#red (n=775)
Not Re#red (n=244)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Most also fail to seriously consider issues that can derail retirement security, such as health and long-term care, other retirement risks, and taxes
How much thought have you given to each of the following issues that occur throughout retirement?
Total (n=1,019)
16%
12%
11%
18%
16%
16%
34%
28%
27%
Dealing with changing health and long-‐term care
issues
Risks that could undermine your re?rement
Your taxes in re?rement
A very great deal (7) (6)
18%
9%
11%
19%
20%
18%
37%
29%
29%
Dealing with changing health and long-‐term care
issues
Risks that could undermine your re?rement
Your taxes in re?rement
A very great deal (7) (6)
Re#red (n=775)
Not Re#red (n=244)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
While 4 in 10 report giving substantial thought to how to withdraw income from assets and how much, fewer have strategized about generating retirement income
How much thought have you given or did you give to each of the following?
If retired (n=775)
18%
18%
12%
23%
21%
15%
40%
39%
27%
How much income your nest egg will produce over the years
The most efficient way to take income from your nest egg
Strategies for generaEng income in reErement
A very great deal (7) (6)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Only a minority of married consumers have given a great deal of thought to the financial consequences if their spouse were to predecease them.
How much thought have you or did you give to each of the
following if your (spouse/partner) were to die before you?
If married or live with partner (n=795)
20%
17%
14%
19%
16%
10%
40%
33%
24%
What your financial circumstances would be like
How much money you would need
How much your Social Security benefits may be reduced (If
married, n=556)
A very great deal (7) (6)
20%
19%
13%
15%
13%
11%
34%
32%
24%
What your financial circumstances would be like
How much money you would need
How much your Social Security benefits may be reduced (If
married, n=206)
A very great deal (7) (6)
Re#red (n=612)
Not Re#red (n=183)
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Other Surprises, Comments?
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
What’s Next?
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Questions?
TITLE SAFE
ACTION SAFE
ACTION SAFE
TITLE SAFE
Thank You!To Register for the RICP® 3 Course Package
please visit: ricp.theamericancollege.edu
