Despite the financial stresses of 2020, a Hearts & Wallets survey found that near-retirees are eyeing earlier retirements. The survey found 38% of people 54 or under plan to stop working in the next five years, while 11.5 million households with the primary breadwinner younger than 55 indicate that’s the age they’ll retire. Two out of five respondents say they plan to retire before age 65.
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These households are more likely to have sophisticated financial plans with multiple investment products, carry less student debt and spend less on housing, Hearts & Wallets found. However, credit card debt and low savings rates—only 18% of these ambitious retirees are saving at least 15% of their income—could prevent some of them from reaching their goals.
The good news is that this subset of pre-retirees is most amenable to financial advice, especially if they have multiple sources of income lined up. Almost half of respondents who were still working said they expect to have at least four different sources of income when they retire.
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“More income sources allow retirees to weather inflation, stock market volatility and other nest egg pressures,” Amber Katris, Hearts & Wallets Subject Matter Expert, said in a statement. “Firms should understand which sources matter most to individual consumers.”
Katris recommended that advisors consider using assets-to-income ratios to illustrate retirement security, “which are more concrete and easier to understand than replacement rate projections.”
Hearts & Wallets surveyed almost 6,000 households in August 2020, and drew data from its Investor Quantitative Database for the report.
This trend coincides with an increase in people who want to keep working as long as possible. Over half (53%) of people surveyed said they want to work as long as their health allows them to, up three percentage points from 2019. Meanwhile, just 34% said they want to retire by a certain age, an increase of only two points.
“The pandemic has disrupted many lives and jobs,” Laura Varas, CEO and founder of Hearts & Wallets, said in a statement. “One repercussion is a renewed appreciation for building financial security and planning for the possible end of work. Firms should assist consumers in understanding their personal work viability and provide support to achieve retirement goals without making assumptions about target dates, either earlier or later than the traditional mid-60s.”
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- Women Cut Back on Raiding Retirement Funds Early
Danielle Andrus works as an editor for The Financial Planning Association® (FPA®). Over the past 15 years, she has worked in various capacities, including writing and editing. Andrus has worked for several notable publications and outlets and spent more than seven years as the executive managing editor at ALM Media, publisher of Investment Advisor magazine and ThinkAdvisor.com. Before that, she was online editor for Summit Professional Networks, where she oversaw newsletter development for four magazines, including Benefits Selling, Senior Market Advisor, Boomer Market Advisor, and Bank Advisor.
