According to Nationwide’s Ninth Annual Advisor Authority study, powered by the Nationwide Retirement Institute, nearly one-third (31%) of retirees expect to be less secure in their retirement than their parents and grandparents were.
As the transition to life after retirement demands crucial shifts, including the prioritization of financial commitments, short-term financial obligations like basic living expenses, and long-term debt continues to weigh on retirees, with 26% of retired investors continuing to pay off their mortgage, and 25% still paying down credit card debt.
This feeling of uncertainty among retirees is compounded by the fact that everyday financial obligations remain a concern, as more than one in five (22%) of retired investors polled by Nationwide are concerned about affording their monthly financial commitments.
A change in plans
Retiring investors have been adjusting their priorities to make ends meet in the wake of economic constraints. And while most American savers dream of a retirement of leisure and travel, nearly four in ten (39%) retired investors are spending less on entertainment to meet financial commitments in today’s economic environment, and more than one-third (34%) are taking fewer trips or vacations.
To compensate further, 22% of retired investors are drawing more funds from retirement accounts, intensifying the traditional decumulation stage.
“The picture of life after retirement has changed for many people as economic stressors continue to weigh on retired investors,” said Mike Morrone, VP of Nationwide Annuity Business Development. “Now is the time for advisors and financial professionals to check in with their clients and help them remain calm, nimble and informed in the face of continued economic headwinds, ensuring the plan they have in place continues to position them for a secure retirement.”
Proper preparation
Nationwide found that in order to account for financial headwinds, retirees are bolstering their plans, as 63% of the retired investors polled have a strategy in place to protect their assets against market risk, up from 54% last summer.
However, these retirement plans look radically different from the plans of generations past. Some retirees (12%) are abandoning the 70%-80% spending rule (i.e., ensuring they have 70-80% of their pre-retirement income per year in retirement) and 11% are casting aside the 4% rule (i.e., withdrawing 4% of their retirement portfolio each year when retired).
Retired investors are also initiating conversations about legacy planning and wealth transfer with their heirs. Nearly one-third (32%) of retirees are discussing wishes for end of life (long-term care expenses, funeral preferences, etc.), and 34% are discussing financial details of their estate with heirs.
Advisors are supplying their clients with the guidance needed to help achieve financial security in retirement, counseling their retired clients on how to generate guaranteed income (23%), prioritizing wants vs. needs (21%) and supplementing income out of necessity (16%).
Advisors are also helping investors plan for lingering financial commitments, such as mortgage repayments, which more than a third (34%) of advisors say their clients are planning to continue paying in retirement.
With the Great Wealth Transfer underway, advisors are helping clients–and their heirs–prepare. More than half (59%) of advisors say their clients are confirming beneficiary designations to prepare their heirs for the transfer and management of wealth. Another 54% say their clients are reviewing or creating estate planning documents, and 44% are building financial confidence and knowledge.
“Advisors are recognizing and acknowledging investors’ desire to avoid making the wrong moves in retirement,” Morrone said. “They can help clients feel more confident about their retirement plans by understanding their goals and anxieties, and helping them protect their savings and plan for income they won’t outlive by reinforcing the value of different retirement solutions and products, like annuities.”
The price of payoffs?
A recent article from Bankrate examined the topic of mortgage payoffs, focusing on the benefits of paying off your mortgage early, such as gaining peace of mind and other considerations for an early mortgage payoff. The Bankrate study asked:
- Will other investments beat paying off a mortgage early?
- Will all your cash be tied up in the mortgage?
- How will you use the money if you don’t pay off your mortgage early?
- How much do you value peace of mind?
Bankrate stressed that if paid off your mortgage early, to ensure that you are productive with the extra funds by putting that money to good use and earn better returns by:
- Investing in the stock market to increase earning potential.
- Increasing retirement savings by making higher contributions.
- Funding education by contributing to an education savings plan.
- Building (or adding to) an emergency fund.
- Paying off high-interest credit cards, personal loans or student loan debt to save on interest.
Report methodology
The research was conducted online within the U.S. by The Harris Poll on behalf of Nationwide from January 8-23, 2024, among 518 advisors and financial professionals and 2,346 investors ages 18+ with investable assets (IA) of $10K+. Investors included a subset of 391 “pre-retirees” age 55-65 who are not retired, and subsets of 346 single women and 726 married women. To ensure the investor sample was representative, the data were initially weighted separately for those with investable assets of $10K to less than $100K and those with $100K+ and then post-weighted/combined into a total investor group. Data for the subset of pre-retirees aged 55-65 who are not retired were weighted separately as needed by education, age by gender, race/ethnicity, region, marital status, household size, employment, household income and investable assets.
