LIMRA Secure Retirement Institute research found that just over half of pre-retirees (age 50 to 75 with at least $100,000 in household investable assets) are confident in their retirement security based on their self-assessed ability to manage finances (62 percent) and the expectation of living modestly in retirement (59 percent.)
However, study results published in the Institute’s new 2015 Retirement Income Reference Book point out that only 20 percent actually have a formal retirement plan and less than 40 percent have done basic planning activities, such as calculating what their assets, income, and expenses will be in retirement.
A confident attitude is encouraging, but Institute researchers point out that confidence based on subjective assessments instead of real-world planning can threaten the security of a person's retirement. Institute research shows only 1 in 4 retirees express major concern about longevity risk, even though half of 65-year-olds will live into their late 80s. And less than half said they were concerned with the risk of having to provide for long term care expenses and costs associated with health care outside of what Medicare covers.
On the flip side, LIMRA Secure Retirement Institute finds that pre-retirees who work with an advisor are more likely to have done the necessary retirement planning which would lead to more realistic confidence in their retirement security. (See Chart) In fact, Institute research finds that pre-retirees who work with an advisor are more likely to feel confident than those who do not (79 percent vs. 50 percent). Retirement Income Reference Book data on pre-retirees who “go it alone” without professional advice shows less than half have figured out what their income will be in retirement and only 27 percent have estimated how long their assets will last.
While some planning is better than none, a specific plan enables pre-retirees to feel confident about retirement based on real information and preparation instead of ad hoc strategies and belt-tightening.