Helping You Protect Your Money. Helping You Protect Your Future.
According to a recent publication by SHRM, there were several recent employee surveys conducted which show that retirement confidence is down, with fewer workplace savers seeing themselves on track to retire when they had originally planned.
In fact, workers' outlooks on retiring have seen a reversal from the last few years where confidence remained steady and even increased.
Most workplace savers now say they're unsure about the economic outlook, given an inflation rate that rose 9.1 percent year over year in June. Adding to their uncertainty was a steep decline in stock market values this year, with the benchmark S&P 500 index plummeting nearly 20 percent from January through May before improving a bit to notch right at 18 percent in 2022 as of the end of July.
Declining Retirement Confidence
Overall, 63 percent of savers feel they are on track for retirement, down from 68 percent a year ago, according to BlackRock's seventh annual Read on Retirement survey, conducted between March 25-April 30, 2022.
Inflation is the main driver for the decline in confidence among more than 1,308 respondents who participate in their employer's 401(k) or 403(b) plans, with 87 percent of workplace savers reporting that they're concerned about inflation affecting their retirement.
It was also found in this survey, that older workers may have a more realistic view of retirement expectations. Nearly half of Baby Boomers said they'll need to save between $1 million and $3 million for a comfortable retirement, at least four times the amount that those from Generation Z anticipate needing.
Meanwhile, almost half of those who planned to retire in 2022 are reconsidering or have put that plan on hold, according to a June survey of 1,000 U.S. consumers by software-maker Quicken Inc. And, workers ages 58 to 74 who were not planning on retiring in 2022 are now considering delaying retirement even further.
Among those who are considering delaying retirement, or "unretiring" and returning to the labor force, the changing economic climate is top of mind. Respondents cited the following factors as reasons they will need to continue working:
1. Inflation pushing up costs (cited by 65 percent).
2. The decline in the stock market (45 percent).
3. Increased interest rates (30 percent).
Even before this year's economic challenges, however, retirement ages had been rising. In 2021, the average retirement age for men in the U.S. was 64.7, roughly three years later than in the mid-1980s and early 1990s, according to a July report by the Center for Retirement Research at Boston College. The retirement age for women in 2021 rose to 62.1, up dramatically from 55 in the 1960s.
Major drivers for delaying retirement in recent decades, the researchers noted, include the shift from guaranteed defined benefit pensions to defined contribution 401(k)s and the decline of retiree health insurance, as well as extended life spans and the desire to remain active and engaged.
Protecting Your Retirement Savings
At Summerlin Benefits Consulting we know that today’s more mature employees want help with saving for retirement and it’s important that employers provide resources and tools to help these employees make informed decisions about their long-term savings.
For example, employees in their mid to late 50’s should be allowed to do an In Service Transfer from their 401k to a safe external environment, like a Fixed Index Annuity. This will allow the employee to protect the savings they have built over the years, so that they won’t experience the impact of major losses right before reaching retirement age, which could cause them to have to work longer than anticipated.
More mature investors, even when still employed, should shift their retirement savings focus to Safety 1st. Protecting the money you already have and getting a reasonable rate of return over time without any more losses will help you be better prepared by the time you do retire.
You have two choices when pondering how- and whether- you will live a long, healthy life.
You can either apply the latest findings of longevity research to boost your odds, or you can eat what you want, forgo health and wellness habits, and figure it’s mostly genetics anyway. Most of us choose the middle ground. We don’t throw caution to the wind, but we don’t limit our caloric intake and turn into diet-obsessed ascetics either.
If your goal is making it to 100, more power to you. It’s a crapshoot! Only about .004% of the current global population has done it.
These lucky few are not easy to categorize. Some regularly enjoy alcohol, fat or sugar (in moderation). Researchers theorize that daily routines- even seemingly unhealthy ones like eating a dish of ice cream every night- might provide a beneficial stability.
A positive attitude helps them wave off irritants and overcome setbacks. They don’t worry about what they can’t control. And they derive joy from everyday experiences like watering plants or watching clouds cross the sky.
“People who live longer tend to be optimistic and manage their stress well,” said Tom Perls, M.D., a distinguished professor of medicine at Boston University School of Medicine. “And optimistic people tend not to be neurotic, where they internalize their stress rather than let go of it.”
Founder and director of the New England Centenarian Study, Perls marvels at the resilience of individuals who reach an advanced age. He notes that a surprising number of people who approach age 100 live productively despite serious health ailments.
“About half of them have a history of aging-related disease like heart disease,” Perls said. “Maybe they had a stroke at 85 or have a history of cancer or diabetes. What's remarkable is how they’re still living independently in their mid 90s. Normally, such diseases would carry a higher mortality risk. But, these individuals have a level of resilience that mitigates these diseases.”
Like most longevity experts, he also credits good genes. “Genetics is playing an incredibly strong role at the very oldest ages,” he said.
Perls offers a free online resource, the Living to 100 Life Expectancy Calculator, to help you assess your odds. The calculator can be found at Livingto100.com. After creating an account, you can answer a few questions, and the results include a life expectancy calculation along with personal feedback and recommendations. An exercise like this can also help you establish necessary financial plans for a long, healthy life!
For decades, we’ve known that good nutrition, regular exercise, and maintaining a healthy body weight can extend our lifespan. And it’s no secret that socially engaged folks with an active mind (keep doing those crossword puzzles) and a rosy outlook on life can boost their longevity.
But we don’t always stop to think that longevity requires a good, solid financial plan as well, and lifetime income can sometimes be a key component to plan for.
There are new and exciting fields of study helping us live longer, like one that involves biomarkers of aging. Using various tests and measurements, researchers seek to contrast one’s biological age from their chronological age.
“Different people appear to age at different rates,” said Dr. Matt Kaeberlein, professor of laboratory medicine and pathology at the University of Washington in Seattle. “But we don’t understand why. So we’re developing biomarkers that are predictive at an individual level. These tools can measure the efficacy of different interventions that might be worth watching” to increase lifespan.
If someone’s biological age is 70 even though their chronological age is 60, for example, medical experts might suggest ways to slow their biological clock. Such interventions can include more exercise, better nutrition or even drugs that target an individual’s predisposition to disease.
Again, actions to sustain longevity are great, but require a financial plan as well. Being informed of things you can do, like how you exercise, what you eat or drink, or what your optimum weight should be is key, but the biological aging process will impact optimal lifestyle changes also.
So do what it takes to be physically and financially healthy for many years to come.
At Summerlin Benefits Consulting, we specialize in financial well-being, no matter how long you live. Helping our clients focus on enjoying their lives without financial stress is a way that we can help people every day.
Here’s a puzzler for you.
What are the odds that you’ll be better off over the next 10 years if you hold your retirement portfolio in boring Treasury bills, money-market funds or certificates of deposit rather than if you hold it in a diversified, low-cost U.S. stock index fund?
If you think “no chance,” or “that’s crazy,” sorry, but you have to stay after school.
If you think “1 chance in 50” or “1 chance in 20,” ditto.
Based on the historical record the correct figure is about 1 in 6. At least, that’s how often deposits have beaten stocks over any given 10-year period since the 1920s. Deposits won more than 15% of the time. (With no volatility, either). And if you just look at 5-year periods the odds deposits rise still further. They were a better investment than stocks in more than 23% of 5-year periods. Nearly 1 time in 4.
Oh, and this is looking at the S&P 500 index. Even low-cost index funds will underperform the actual index because of costs, and nearly every large U.S. stock fund with an actual manager will do even worse than that.
The goal here is not to panic anyone, nor to get people to sell their stock funds, nor to predict doom and gloom for the U.S. market. This is simply the historical record and one that should be taken seriously, since history does tend to repeat itself over time.
According to the ancient Greek philosopher Heraclitus, “no one can walk through the same river twice, because the second time it’s not the same river and you’re not the same person.” Boy, has this ever been more true than when applying it to financial history and today’s US stock market trends?
Sometimes, especially for more mature investors, it may feel a little bit like de ja vu. For younger investors, we just don’t know how far the next 5 or 10 years will resemble the past, but we do know that equities, stocks, and other securities can lose value- powerfully and swiftly. So, it makes sense to practice some safety in your portfolio no matter what your age.
Let’s call this a dose of realism to younger investors saving for their retirement who haven’t yet experienced a major market decline in their adult lives. Many of today’s investors have been subconsciously conditioned by decades of Federal Reserve manipulation to think that when it comes to stocks the only way is up. And that is just not true.
These thoughts were provoked by a staggering new survey from money management firm Natixis. Dave Goodsell, executive director of the Natixis Center for Investor Insight, says the median U.S. millennial investor EXPECTS their investments to earn 20% a year, on average, over the long term.
No, really. And those aren’t even “nominal” returns. Those are actual returns that the millennial generation really expects to receive on top of inflation.
And across all age cohorts, he adds, the median U.S. investor expects average returns of 15% a year. Again, on top of inflation.
The actual historical average? Over the past century or so, large U.S. stocks have beaten inflation by less than 7% a year a year—over the long term. To put that in context, it means that over a 20-year period, today’s young investors are overestimating their total returns—thanks to compounding—by a factor of 10.
Goodsell stated in a recent interview that barely one-third of investors in their survey expect real returns averaging less than 10% a year over the long term. Among millennials it’s barely one in 5.
No wonder, when millennials were asked to define financial “risk” in the survey, hardly any considered “losing wealth” (12%) or “not meeting financial goals” (13%). It is true that more than twice as many identified “volatility” as risk, but that contradicts their performance expectations for stocks and other similar investments, and this requires a reality check because if volatility doesn’t actually lead to a loss of wealth, or a failure to meet financial goals, do they truly see it as a “real” risk?
OK, so it’s just a survey. But even if these figures are directionally correct, vast numbers of retirement savers in their late 20s and their 30s are living in somewhat of a La-La land. In fact, the survey was conducted across more than 8,000 individuals in 24 countries.
So, what can millennials do differently with a more direct approach to tackling “real” risk?
Well, one strategy that millennials may not be considering but could benefit from, is a fixed index annuity. These fall into the category that we at Summerlin Benefits Consulting fondly call, “safe money strategies”. Fixed index annuities (FIAs for short) can help reduce risk by protecting the consumer’s savings and growth against down markets while still growing their money at a reasonable rate of return during up markets. Many people may believe the myth that fixed index annuities are only for seniors, however they can be beneficial to younger investors too!
Even though some millennials may want to pursue a more aggressive or riskier method of investing, some level of safety makes sense at all ages. And another benefit to a fixed index annuity is that it provides a set-it and forget-it approach. This can be an enticing factor, especially for millennials or more risk-adverse investors.
The good news, according to Natixis, is that growing numbers of young people are seeking out actual human advice and expertise in this area. About 70% of the millennials in the survey have tapped a human as their financial professional and only 6% relied solely on a “robo adviser.” In fact, only half of millennials surveyed are willing to place their trust in “algorithms,” which may be the best news of all!
Financial Professionals who specialize in safe money strategies for the younger generation will provide a great service for millennials who are seeking to truly diversify their portfolio and take a more realistic approach to plan for their future.
Summerlin Benefits Consulting serves all age groups. We focus on safety in retirement planning and help our clients find the best strategy for them in their current stage of life.
 Dave Goodsell, Natixis Investment Managers, Global Survey of Individual Investors by CoreData Research March-April 2021