A recent TIAA-CREF Institute survey shows that investors approaching retirement are focused on assuring an income that can maintain their standard of living. The survey of 1,002 people who work in higher education and participate in a retirement plan found that:
“Economic forces and recent extreme market volatility make it more important than ever for individuals to take responsibility for their retirement security,” said Maliz Beams, TIAA-CREF’s head of client services. “This survey highlights a few key retirement priorities and how some are getting retirement savings on back on track.”
“After the financial turmoil of the past year and as employers and government consider potential changes in retirement plans and policies, we saw the need for a deeper understanding of the actions taken by current workers and how they view their retirement security,” said Paul Yakoboski, Principal Research Fellow, TIAA-CREF Institute.
Additional findings include:
Financial Planning, Advice and Asset Allocation
85 percent of those who have consulted with a financial advisor within the past two years feel that the advice was independent and objective and 69 percent typically implement the recommendations received.
The top reasons cited for seeking advice included:
“Objective, non-commissioned advice can help those saving for retirement assess their asset allocation and retirement income strategies,” added Dan Keady, Director of Financial Planning, TIAA-CREF. “While only 41 percent of near-retirees in the survey changed their asset allocation in the last year, the overwhelming majority of these (83 percent) decreased their equity exposure. While we don’t know how much of this was an overdue adjustment to long-term asset allocations and how much was an attempt at market timing, an advisor and a long-term plan can help people avoid jumping in and out of investments, a practice that can be detrimental to long-term financial security.”
Converting Savings to Income in Retirement
Two-thirds of those surveyed expressed concern about outliving their savings and about choosing the best way to draw income to live on from their savings. These findings demonstrate the need for defined contribution plans to include a low-cost annuitization option that would generate a guaranteed stream of income to cover basic living expenses in retirement.
Among those planning to annuitize some or all of their retirement savings, the security of a guaranteed lifetime stream of income was by far the greatest motivation, cited by 40 percent, with 13 percent also citing the safety, stability and security of the annuitization option and 11 percent feeling that it will maximize their retirement income.
Healthcare Costs in Retirement
A person retiring today at age 65 would need about $300,000 in savings to cover lifetime medical expenses to age 901.
Seventy-one percent of those surveyed said they are concerned about being unable to afford good health care. While most have thought about how they will pay for deductibles, co-payments, premiums and co-payments in retirement, only 23 percent feel very well prepared to meet such expenses. Sixty-three percent said they would be very or somewhat likely to contribute to a tax-preferred savings account specifically designed to pay for health-related expenses in retirement, indicating a desire for such a savings vehicle.
About the Survey
1,002 higher education employees, ages of 50-70, who are actively saving for retirement were surveyed by the TIAA-CREF Institute in conjunction with PublicMind of Farleigh Dickinson University during April and May 2009. The survey covered planning and saving decisions, funding healthcare in retirement, converting saving into income and using professional financial advice.
About TIAA-CREF
TIAA-CREF (www.tiaa-cref.org) is a national financial services organization and the leading provider of retirement services in the academic, research, medical and cultural fields with $374 billion in combined assets under management (6/30/09).
About the TIAA-CREF Institute
The mission of the TIAA-CREF Institute, part of TIAA-CREF, is to foster objective research, build knowledge, support thought leadership, and enhance understanding of strategic issues related to higher education and lifelong financial security. For additional information regarding the TIAA-CREF Institute, please visit www.tiaa-crefinstitute.org.
1 Employee Benefit Research Institute (EBRI) Issue Brief No. 317: May 2008
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.
Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Advice and Planning Services is a division of TIAA-CREF Individual & Institutional Services LLC. TIAA-CREF Institute is a division of Teachers Insurance and Annuity Association (TIAA), New York, NY.
© 2009 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017
