Individuals with a formal financial plan have two to four times more wealth when entering retirement compared to those without one, finds a new report out today from T. Rowe Price.
Individuals with a financial plan are also more likely to contribute more toward their retirement and work with a financial advisor, the report found.
“Having a formal financial plan tailored to one’s specific needs can help not only with wealth accumulation, but also with making retirement savings last longer.”
Bill Meyer, head of Retiree, Inc. at T. Rowe Price
The insights from the report are based on T. Rowe Price’s annual Retirement Savings and Spending study, which surveys a national representative group of 401(k) participants. The report with more details on the importance of financial planning for retirement can be found here.
The report also found that the demand for financial planning services is strongest among individuals who are within one to five years of their retirement date, and 38% of respondents over the age of 50 indicate that not having enough money was their most significant obstacle to starting retirement planning.
“The retirement industry has historically focused on helping savers climb the hill of contributing toward their future retirement,” said Bill Meyer, head of Retiree, Inc. at T. Rowe Price. “However, given the number of complex financial decisions facing retirees on the other side of that hill, the need for better planning and guidance through retirement is clear. Ultimately, having a formal financial plan tailored to one’s specific needs can help not only with wealth accumulation, but also with making retirement savings last longer.”
Additional key insights from the report include:
- Survey respondents with a formal plan reported 60% higher confidence about their financial outlook.
- Seven in 10 pre-retirees who responded to the survey were in the process of forming a retirement plan or thinking about it.
- 60% of survey respondents indicated that their employers are the primary source for financial education and guidance.
- 40% of respondents are willing to engage a financial advisor and interested in using digital planning tools to help with income, savings, and spending.
“Advances in technology have given investors greater access to effective and convenient solutions for personalized financial planning, and we expect the demand to increase, especially for tools involving retirement income,” Meyer said.
Plan sponsors can meet this need by providing digital services and financial wellness programs that address the impending needs of pre-retirees and families in retirement. These types of solutions are not only valued by participants but could also be a catalyst for driving better retirement outcomes.
Baltimore, Md.-based global investment management firm T. Rowe Price released its 2024 U.S. Retirement Market Outlook last November. The firm has $1.51 trillion in assets under management as of Feb. 29, 2024.
SEE ALSO:
• T. Rowe Price Forms Global Retirement Strategy Team
• T. Rowe Price Launches Social Security Tool Targeting Life Expectancy
• Here are the Retirement Policy and Regulatory Trends for 2024
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.