There is some good news for pension savers this week.
A regulation to protect financial advice clients has been brought into force and encouraging results from a major retirement confidence survey show the lion’s share of retirees are happy.
First, the headline: The Biden administration has announced new rules that will require more financial professionals to hold themselves to higher standards when providing financial advice on your retirement money.
“America’s workers and their families rely on investment experts to save for retirement,” U.S. Department of Labor Acting Secretary Julie Su said in a statement. “This rule protects retirees from improper investment recommendations and harmful conflicts of interest.”
From September 23rd, investment professionals must act as fiduciaries – meaning they must put your needs as an investor above their own interests and provide you with unbiased advice. Sounds obvious and it’s hard to imagine that this needed to be nailed down, but there 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 an Individual Retirement Account (IRA), they are obligated to provide the advice that is best for you not them.
According to the wording of the new rule, investment advisory fiduciaries must “advise prudently and faithfully, avoid misleading statements about conflicts of interest, fees and investments, follow policies and procedures that ensure that advice is given in the best interests of the investor, and not charge fees.” more than is appropriate for their services and provide investors with 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 are most likely to view financial advisors and professionals as a trusted source of retirement planning information,” he added.
Confident in a comfortable retirement
The big takeaway from this year’s survey: Two-thirds of Americans are confident they have enough money for a comfortable retirement, an increase from last year. However, Baby Boomers and Millennials reported being more confident about having enough money to live comfortably throughout retirement than Generation X.
That is certainly encouraging, but worker and retiree confidence has not quite regained the ground it lost in 2023, when it fell significantly from the 77% confidence level in 2022.
“Overall, however, there is fairly strong optimism among workers and retirees about their retirement prospects,” Copeland said.
One point of criticism: More than a third of retirees say their travel, entertainment or leisure expenses are higher than expected. And over half of retirees say their total spending in retirement is higher than originally expected.
But they shook it off. Most say they can spend money however they want, within reason. What’s even sweeter is that their retirement lifestyle is better than they expected.
“Retirees are pretty comfortable with what they’re doing,” Copeland said. “Even if they are no longer as optimistic as they were two years ago, pensioners are, on the whole, quite satisfied with their situation.”
Not only are retirees managing their current expenses, but the majority also say they are still saving for the future. And nearly two-thirds are confident they will have enough money to leave an inheritance.
Run the numbers
Staying with the glass-half-full theme, Americans are taking steps to create a financial plan for their golden years.
More than four in 10 workers who are offered a workplace retirement plan report increasing their contributions in the past year.
According to the researchers, half of Americans have calculated how much money they will need in retirement. And the result of their calculation: a significant proportion of workers and pensioners began to save more.
“Our research shows that someone who has done the calculation is more likely to start saving and has a better understanding of what numbers sound reasonable,” Copeland said. “When they did that planning and came up with a number, they stayed grounded in reality and became more confident because they knew what to reach for.”
They have a lot of ground to make up. According to the survey, a third of workers who tried to calculate how much they would need in retirement estimated $1.5 million or more.
However, many of these 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 considered how the age at which they file for Social Security may affect the amount of their Social Security contributions.
However, workers’ plans and retirees’ actual actions are very different. Just over a quarter of workers plan to start collecting Social Security benefits at the average age of 65, which is the age at which they expect to retire.
However, that is not what happened in the past. Most retirees – 7 in 10 – say they plan to retire earlier than age 65, with the median retirement age being 62. And they started collecting Social Security around age 64.
Most employees want to leave the workforce “gradually, over time.” But a whopping two-thirds of retirees had a “full-time break” experience.
Additionally, the vast majority of retirees said the reason they retired earlier than planned was beyond their control.
Work for pay in retirement
The vast majority of workers said they will work for pay in retirement, while only three in 10 retirees say they have actually worked for pay since retiring.
Those who continue to work do so primarily to stay active and engaged.
That didn’t surprise Copeland. “Historically, back to 2005, the majority of retirees said they wanted to work for pay after they retired.” But what happens is that work is affected by health problems or difficulty finding a job as they age , Copeland added.
Copeland said: “We still have issues where older workers are being discriminated against 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 “Staying in control at 50+: How to be successful in the new world of work and “Never too old to be rich.” Follow her on X @kerryhannon.
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