Health care spending and living costs are some of the leading concerns among retirement savers, finds a newly released study by retirement technology provider Smart.
According to the findings, 58% of respondents said health care is a top worry among retirement-related concerns, followed by 57% of respondents who cited being able to afford day-to-day living costs. Additionally, 43% of respondents ages 45 to 54 see their average monthly spend going up in retirement, indicating impacts from inflation and the current market environment.
The Smart report includes findings from 8,000 people worldwide and 2,000 savers across the U.S. and sought to understand current perceptions of retirement linked to spending habits, preferences in retirement fundings, and general understanding of retirement options.
Smart notes that as legislation constantly evolves across the globe, with many moving towards a defined contribution (DC) savings model and thus shifting the retirement savings responsibility to participants, this may influence, and impact long-term savings decisions made by participants.
“As the retirement landscape shifts, in line with emerging technology and reforms to legislation, it is imperative for the industry to remain one step ahead for the benefit of both, those saving for, and drawing income in retirement,” said Jodan Ledford, CEO of Smart, in a statement.
Specifically, in the U.S., the study names SECURE 2.0 along with recent state legislation in California, Illinois, Oregon, as drivers of increased retirement plan coverage. As a result, Smart anticipates coverage to increase gradually, albeit remaining lower than other countries with national mandates on retirement plan coverage.
Importance of financial advisors
According to the study, financial advisors are considered the most useful source of information (32%), with older participants approaching retirement most likely to rely on financial professionals. This was followed by friends and family (28%).
Fifty-one percent of Americans said they expect to get advice from their retirement plan provider, even as just 17% say they receive their most useful advice from a provider. Only 10% of respondents describe their employer as their top source of advice.
Additional findings
In the U.S., men (49%) were likelier to anticipate increased expenses than women (37%), and those closer to retirement were less likely to expect their spending to increase, probably because they hold a better understanding of what their retirement spending will be. Clear and simple communication from a financial professional was found to be more important to women (61%) than men (52%), and to older American respondents (64%) than younger counterparts (51%).
Unsurprisingly, the topic of a phased retirement is becoming prevalent as more Americans choose to transition into retirement rather than fully retire all at once. Over a third (35%) of American respondents said they plan to work into their retirement.
Compared to other age groups, those ages 45 to 54 are most likely to say they will rely on Social Security (63% compared to 60% average) and personal savings (64% compared to 58% average), and least likely to say they will rely on income from continued employment (27% compared to 35% average).
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