Nearly every household with an income of $100,000 or more saves for retirement, but only half of them (49%) believe they will ever be able to retire.
These findings were part of the “2020 Financial Insights” study of U.S. adults 40-65 years of age with annual household income of at least $100,000 by independent financial planning and investment management firm Edelman Financial Engines.
Saving and investing
In the midst of the pandemic, 35% say they do not have enough in cash reserves, including 34% of those in their 40s, 43% of those in their 50s, and 25% of those ages 60 to 65. Four in five (78%) wish they started saving earlier.
More than half (57%) say that they would panic if the value of their investments declined 30% to 50%.
Indeed, many investors have shifted to lower-risk portfolios due to the pandemic, including 34% of those in their 40s, 22% of those in their 50s, and 21% of those ages 60-65.
“Unfortunately, downturns are a part of a cyclical economy,” said Ric Edelman, founder of Edelman Financial Engines. “That’s why it’s so important to diversify and maintain a long-term perspective.”
Top reasons for investing
- Retirement: 74%
- Prepare for a “rainy day”: 27%
- Pay for vacation: 15%
- Buy a car: 15%
- Pay for college: 14%
- Buy a house: 13%
- Start a business: 11%
- Pay for a special event: 9%
- Pay for a wedding: 6%
According to “2020 Financial Insights”, conducted by OnePoll on behalf of Edelman Financial Engines
Retirement fears
A quarter (24%) of pre-retirees, including Baby Boomers, Gen X and older Millennials, have reduced the amount they’re saving for retirement. On average, respondents believe they will need to work at least six years longer than they had planned, due to the pandemic.
“Our survey showed that retirement is by far the most commonly cited reason that Americans invest. It’s extremely troubling that the pandemic has caused so many to reduce their retirement savings rates, as this will only distance them from their goals,” Edelman added.
The advisor effect
Those who have a financial advisor are more confident in their retirement prospects and have taken more steps associated with financial security compared to those who do not have an advisor.
Respondents with financial advisors are 45% more likely to invest and 25% more likely to have sufficient cash reserves than those without financial advisors. In addition, those who have a financial advisor are 30% more likely to believe their financial security will stay intact if markets fall than those without an advisor.
“This study reinforces our views that while the economic crisis has rattled hard-working Americans, those with financial advisors feel more confident in their ability to achieve their financial goals,” Edelman said.
The Edelman Financial Engines “2020 Financial Insights” survey was completed online by OnePoll between Aug. 27-Sept. 1, 2020, among 2,000 U.S. adults ranging from ages 40-65, with an annual household income of over $100,000.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
