Retirement confidence in the US ticks up; new rule for financial advisors is set to start
There’s some upbeat news for retirement savers this week.
A rule protecting financial advisory clients was signed into law, and encouraging findings from a major retirement confidence survey shows that the lion’s share of retirees are, well, happy.
First the headliner: The Biden administration announced new rules that will require more financial professionals to heed a higher standard when providing financial advice to you about your retirement money.
“America’s workers and their families rely on investment professionals for guidance as they save for retirement,” US Department of Labor Acting Secretary Julie Su said in a statement. “This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest.”
Starting Sept. 23, investment professionals will be required to act as fiduciaries — meaning they must put your needs as an investor before their own interests and deliver unbiased advice to you. Sounds obvious, and it’s hard to fathom that this had to be nailed down, but here you have it.
Now when clients like you pay for financial advice from a professional about your retirement accounts such as a 401(k) plan or individual retirement account (IRA), they are required to dole out the advice that’s best for you and not them.
Under the new rule’s wording, investment advice fiduciaries must give advice that is “prudent and loyal, avoid misleading statements about conflicts of interest, fees, and investments, follow policies and procedures designed to ensure the advice given is in an investor’s best interest, charge no more than is reasonable for their services, and give investors basic information about any conflicts of interest.”
Hallelujah.
That’s music to the ears of more than a third of workers and nearly half of retirees who currently work with a financial advisor or professional, according to a survey by the Employee Benefit Research Institute (EBRI) and Greenwald Research.
“And more than half of workers who aren’t currently getting help from an advisor say they will in the future,” Craig Copeland, director of Wealth Benefits Research at EBRI, told Yahoo Finance.
“Retirees were most likely to consider financial advisors and professionals as a trusted source of information for retirement planning,” he added.
Confident in a comfortable retirement
The survey’s big takeaway this year: Two-thirds of Americans feel confident that they have enough money for a comfortable retirement, up a hair from last year. Boomers and Millennials, however, reported higher confidence in having enough money to live comfortably throughout retirement than Gen Xers.
While that’s certainly encouraging, workers’ and retirees’ confidence has not yet completely gained back the ground it lost in 2023, when it was down markedly from 77% confidence levels in 2022.
“Overall, though, there is a fairly strong optimism among workers and retirees with their prospects for retirement,” Copeland said.
One niggle: Over a third of retirees say their travel, entertainment, or leisure expenses are higher than they expected. And over half of retirees say their overall expenses in retirement are higher than they originally expected.
But they have shaken that off. Most say they’re able to spend money how they want, within reason. Even sweeter, their lifestyle in retirement is better than they expected.
“Retirees feel pretty comfortable with what they’re doing,” Copeland said. “Even though they aren’t as optimistic as they were two years ago, in general, retirees are feeling pretty good about their situation.”
Not only are retirees managing their current expenses, but a majority say they’re still saving for the future. And nearly two-thirds are confident they will have enough money to leave an inheritance.
Running the numbers
Sticking with the glass-half full theme, Americans are taking steps to make a financial plan for their golden years.
More than 4 in 10 workers who are offered a workplace retirement savings plan report having increased their contributions in the past year.
Half of Americans have calculated how much money they will need in retirement, according to the researchers. And the fallout from their calculation — a sizable portion of workers and retirees started to save more.
“Our research found that if someone had done the calculation, they were more likely to start saving and they had a better understanding of what numbers sound reasonable.” Copeland said. “If they did that planning and they came up with a number, it kept them in reality and made them more confident because they knew what they needed to reach for.”
They have a lot of ground to make up. A third of workers who tried to calculate how much they will need in retirement estimated $1.5 million or more, according to the survey.
However, many of those workers currently have less than $50,000 in savings and investments, and 14% have less than $1,000.
A deeper planning dive
Six in 10 workers have thought about how the age at which they claim Social Security can affect how much they will receive.
That said, what workers plan vs what retirees actually did are quite different. A little over a quarter of workers plan to claim Social Security benefits at a median age of 65, which is the same age they expect to retire.
That’s not what has happened in the past though. Most retirees — 7 in 10—report retiring earlier than age 65, with a median retirement age of 62. And they started collecting Social Security at around age 64.
Most workers want to step out of the workforce “gradually, over time.” But a whopping two-thirds of retirees had a “full-time stop” experience.
Moreover, the vast majority of retirees reported that the reason they retired earlier that planned was out of their control.
Working for pay in retirement
The vast majority of workers said that they will work for pay in retirement, while only 3 in 10 retirees say they actually have worked for pay since retiring.
For those who have continued to work, they mostly do so to stay active and involved.
That didn’t surprise Copeland. “Historically, going back to 2005, the majority of retirees said they wanted to work for pay after they retired.” But what happens is that working gets derailed by health or difficulty finding a job at older ages, Copeland added.
Said Copeland: “We still have these issues where older workers face discrimination in the workplace.”
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including “In Control at 50+: How to Succeed in The New World of Work” and “Never Too Old To Get Rich.” Follow her on X @kerryhannon.
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