If there’s one thing the past two-plus years have taught us, it’s that we live in an increasingly unpredictable world.
To counter this uncertainty, Americans are turning to professionals to help them feel more confident about their financial future, according to new research from Allianz Life Insurance Company.
According to the Minneapolis-based financial services company, 86% of those recently surveyed cited the benefits of working with a financial professional. And 93% said setting financial goals and developing a plan to achieve them is important to helping them support their future ambitions.
Those working with financial professionals were much more confident (74%) about saving enough in a retirement account versus those who had never worked with an advisor (51%). Similar findings were reported having a plan to address the rising cost of living (60 vs. 40%) and having a plan to diversify retirement savings to protect a nest egg (59 vs. 29%).
A volatile economy is likely why those with help (57%) are more confident about making investments less risky than others (25%). And one of the biggest gaps was in regards to purchasing a financial product that provides a guaranteed source of retirement income (49 vs. 15%).
“So many Americans are in a vulnerable spot right now with their finances, it’s encouraging to see the high value placed on not only the practice of financial planning, but also the guidance of a financial professional,” said Kelly LaVigne, vice president of Consumer Insights, Allianz Life.
While the benefits of working with financial professionals are clear in the survey results, Allianz Life’s 2022 Retirement Risk Readiness Study found that Americans are looking for specific assistance based on their proximity to retirement. Specifically, retirees are focused on having their financial professional:
- Maximize investment return: 56% vs. 38% near-retirees and 43% pre-retirees.
- Protect investments from market loss: 45% vs. 39% near-retirees and 32% pre-retirees.
- Minimize tax burden: 43% vs. 36% near-retirees and 31% pre-retirees.
Conversely, near-retirees (within 10 years of retirement) are most interested in getting help with:
- Maximizing their Social Security benefit in retirement: 34% vs. 27% pre-retirees and 25% retirees.
- Making the best decisions about Medicare and health insurance: 30% vs. 23% pre-retirees and 22% retirees.
Pre-retirees (more than 10 years from retirement) are more likely than others to want their financial professional’s assistance in:
- Securing their children’s financial future: 35% vs. 23% near-retirees and 13% retirees.
- Balancing their budget to save for later while enjoying life now: 33% vs. 25% near-retirees and 26% retirees.
- Paying down debt: 27% vs. 19% near-retirees and 16% retirees.
Pre-retirees, who are more likely to be actively preparing for retirement, expect a different level of engagement with their financial professional, in terms of both service and strategy. A higher percentage of pre-retirees expect their advisor to be tech savvy, offering interactive tools to understand finances under a variety of scenarios (58% vs 48% near-retirees and 37% retirees) and being flexible with meeting options, including virtual meetings, to meet their needs (50% vs 43% near-retirees and 48% retirees).
In addition, more pre-retirees are interested in exploring a non-traditional life path where they may try different things at different times instead of following the traditional school-work-retirement path (54% vs. 48% near-retirees and 36% retirees).
The woes surrounding the future of Social Security continue to show that Americans have expectations that are different from reality.
Nearly 60% of near-retirees say they are planning to work past the current Social Security retirement age. However, only 11% of current retirees actually did so. Moreover, over half of near-retirees (57%) expect to take benefits at full retirement age or defer to a later age, whereas only four in ten (46%) retirees did so. Additionally, only one-third (33%) of near-retirees plan to take Social Security benefits before full retirement age, while in reality, nearly half (49%) of current retirees had to take their benefits early, limiting their maximum benefit.
These misconceptions extend to expectations about the role Social Security will play in their overall retirement income strategy. More near retirees (40%) and pre-retirees (35%) believe that people will get enough from Social Security to meet their needs in retirement; only 10% of retirees said this is true.
“Miscalculating how much you can depend on Social Security benefits can have a detrimental effect on your financial health throughout retirement,” added Allianz Life’s LaVigne. “Financial professionals have the tools to help people make informed decisions about a number of complex topics, including a Social Security strategy, so their clients have a better chance of avoiding any pitfalls that can result from a lack of planning.”
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
