Failing to plan means planning to fail with retirement security

The good news is that since our last survey, more consumers feel secure about their retirement prospects. Forty-five percent of respondents characterized themselves as very secure in terms of having enough savings and income to maintain a comfortable lifestyle in their senior years, compared to just 28% in Deloitte's prior study. However, the bad news is that still leaves the majority (55%) feeling insecure about retirement despite a much improved economy and stock market since the last survey was deployed.

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Indeed, higher feelings of security in general is likely more attributable to big boosts in account values fueled by the bull stock market of the past few years, rather than any significant changes in how the industry approaches consumers about retirement planning, meaning such feelings of security might prove to be fleeting if investment markets change direction.

Our research found that an inability to save sufficiently was the biggest challenge, cited by 43% of those who said they are not secure about their retirement. And one new factor—simple inertia—emerged as a major problem in the latest survey, as three in 10 said they intend to put a formal retirement plan together, but just haven't set aside the time to do so.

Determine how much income you will need

Deloitte's latest research confirmed that having both a formal retirement plan in place and working with a professional advisor to put one together makes a big difference in terms of security. We found that those with a formal savings and income plan were far more likely (65% versus 25%) to be very secure about their retirement than those without one. The same observation held true among respondents who worked with an advisor (60% versus 32%) to prepare for retirement.

Having both a plan and an advisor continues to be the most impactful combination, based on our survey responses. Among the consumers in the latest survey who said they are very secure about their retirement, 53% have both a formal plan and an advisor, while another 30% have one or the other. Only 17% are very secure despite having neither a plan nor professional help.

Having a "plan" means going beyond simply opening a 401(k). It involves determining how much income one will need to support the lifestyle they want, and establishing a comprehensive financial infrastructure (savings vehicles, investments, insurance programs, etc.) that could realistically help them achieve their retirement goals.

(Photo: Shutterstock)

Unfortunately, only about half of the consumers we surveyed have such a detailed plan, or even work with an advisor to address their retirement needs. We were somewhat surprised to find that convincing people to formally prepare for retirement is a challenge even for those working with advisors, as 41% of the intermediaries we interviewed said that fewer than half their clients have a written plan in place.

Why is this the case? Deloitte's most recent research validated our earlier finding that a number of major barriers are discouraging or preventing more people from engaging with the financial services industry to help secure their retirement — most especially conflicting financial priorities and a general lack of trust in the industry. In addition, a significant segment had a "do it yourself" mentality when navigating the complex world of retirement planning, while many respondents were unfamiliar with retirement-focused products.

New, proactive approaches needed

To overcome such barriers and move the needle on retirement security among a much larger segment of the population, financial services institutions and advisors should be trying new, more proactive approaches to engage both existing clients and those who have yet to take advantage of the industry's expertise and potential solutions.

In our latest report on how the industry might help more consumers meet their retirement needs, we focus on four key themes:

• Broadening the delivery of holistic advice and planning, so that conflicting financial priorities can be addressed as part of a comprehensive plan.

• Enhancing educational efforts, so that consumers become more aware of what they need to do to properly prepare for retirement, while familiarizing them with some of the options offered by the industry — such as annuities, life insurance, and long-term care coverage.

• Engaging clients earlier on in their financial life cycle, to build a stronger relationship, more credibility, and greater trust.

• Leveraging the workplace more effectively to foster disciplined retirement planning, especially after recent regulatory changes making annuities that feature lifetime income options a more prominent alternative for employment-related plans.

Go to Deloitte University Press to access Deloitte's full research report — "Making Retirement Security A Reality: What can financial institutions and advisors do?" — co-authored by yours truly, along with my Deloitte colleagues Val Srinivas and Sean Cunniff. You can also listen to our May 5 webcast about the study and potential solutions, either live or by accessing the archived version afterwards.

Sam Friedman (samfriedman@deloitte.com) is insurance research leader with Deloitte's Center for Financial Services in New York. For many years, he was Editor in Chief of National Underwriter. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn. These opinions are his own.