Nest eggs will need to work harder
With the confluence of declining pension incomes and longer lifespans, the strong retirement asset retention seen in this last generation of retirees will not likely be repeated for much longer. Future retirees will need a greater percentage of overall income generated from retirement assets—meaning nest eggs will need to work harder for longer. This is not inherently a bad thing, but it will require a more proactive and focused effort all around: improved savings rates and consistent investing, sound guidance and innovative investment solutions to manage risk and income needs.
In order to better understand why retirees are either spending down assets or not, BlackRock engaged Greenwald and Associates to conduct 19 in-depth interviews and survey 1,510 retirees in February 2018 to seek deeper insight into how retirees really think about spending and investing in retirement to better understand the motivations and biases driving the numbers.
Six key themes
We identified six key themes and drivers of retiree spending behavior that emerged from the findings and offer “lessons learned” to help advisors advance conversations at both the plan sponsor and plan participant levels.
1. Retirees prefer to keep their assets untouched
Very few want to tap into their savings to finance their spending in retirement, especially those with high levels of assets who are very content to leave all or a significant amount of savings unspent.
Only one in four feels they will have to spend down principal at all to fund their desired lifestyle. For most, retirement is not a time to live it up, it is more important to feel financially secure.