The Pulse

Most Boomer Investors Are Confident About Their Retirement

Four in five believe they will have a better retirement than their parents, despite pandemic and market uncertainties

Access full Charles Schwab 2020 Modern Retirement Survey here.

SAN FRANCISCO–(BUSINESS WIRE)–Amidst a global pandemic, economic uncertainties and an election looming, Boomers invested for retirement are confident that they will still enjoy their golden years. According to the Charles Schwab 2020 Modern Retirement Survey, more than 80 percent of both those who have retired and those who are soon-to-retire are satisfied or confident their lifestyle will be everything that they envision.

The first-time survey was conducted among 2,000 Americans aged 55 to 75 with at least $100,000 in investable assets, including their savings for retirement.

Among those surveyed, 84 percent anticipate their quality of life in retirement will be better than that of their parents and 80 percent believe their quality of life in retirement will be better than that of their children. Further confirming that these Boomers are ready to make the most of their golden years, nearly two-thirds (65 percent) said they would rather spend their money in retirement than leave an inheritance for their children.

On average, survey respondents have accumulated $920,400 in retirement savings1, and more than eight in 10 (82 percent) believe their savings will get them “all the way” or “most of the way” to living out their dreams in retirement. Although this amount seems more than sufficient, survey respondents also believe they need $135,100 per year on average to live their “best life” in retirement.

“Boomers in this study have been saving for retirement and are confident, but for many there’s a potential gap between what they have saved and the retirement they’re envisioning. The reality is that they may come up short considering an average savings of $920,400 will only last about seven years at their expected spending rate,” said Rob Williams, CFP®, vice president of financial planning and retirement income at Charles Schwab. “The good news is that these Boomers may have other sources of income like Social Security, but the only way retirees can be sure the math adds up is by putting pen to paper and having a plan in writing.”

Aspiring Retirees And Those Already Retired Split On How “Golden” Their Retirement Years Will Be

While retirement optimism is strong among the Boomers surveyed, Schwab’s study found significantly different perspectives on the future of retirement between those who have not yet retired (aspiring retirees), those who have been retired for less than five years (apprentice retirees) and those have been retired for five years or more (accomplished retirees).

Aspiring retirees in the survey by and large expect to retire later, are more likely to plan to work in retirement, and are less likely to say the COVID-19 pandemic will impact their desired retirement lifestyle. However, they feel less financially prepared to weather another pandemic compared to those who have settled into their retirement.

Aspiring
Retirees

Apprentice
Retirees

Accomplished
Retirees

Average age expected to retire/retired

66

62

59

Plan to work part-time in retirement

33%

6%

2%

Feel very financially prepared for another pandemic

32%

39%

40%

Feel lifestyle in retirement is/will be everything that they envisioned

84%

81%

85%

Financially impacted by COVID-19

31%

13%

2%

Feel pandemic has negatively impacted ability to achieve desired retirement lifestyle

25%

45%

38%

“As Boomers who have yet to retire think about winding down from their decades-long careers, many of the traditional senses of ‘retirement’ don’t apply today—their needs and wishes are diverse and for many, a hard stop at 65 just doesn’t sit right,” said Williams. “No matter what their dream retirement may look like, it’s important for rising retirees to think about how they may need to boost their savings or adjust their portfolio, when it may be the right time to start taking Social Security and how to plan for future health care costs. Answering these questions can help make the transition to retirement smoother.”

COVID-19 Prompts Impacted Boomers To Refocus Priorities

Despite an ongoing global pandemic, Schwab’s survey found that more than three in four (75 percent) of Boomers’ lifestyle priorities in retirement remain the same as before:

  • Stay fit and healthy (97 percent)
  • Spend time with family (95 percent)
  • Spend time at home (93 percent)

Nineteen percent of survey respondents say they or their spouse were financially impacted by COVID-19 through a salary cut or reduced hours, being laid off or furloughed, or having to retire earlier than planned. While the pandemic hasn’t changed the way Boomers surveyed plan to spend their golden years, it has prompted some who were financially impacted by COVID-19 to take more action to course correct. The top actions taken by those who were impacted include:

  • Saved in an emergency fund (24 percent)
  • Talked to family and friends about money (22 percent)
  • Calculated total amount needed for retirement (18 percent)
  • Updated retirement plan (17 percent)
  • Called their financial advisor (16 percent)

Schwab’s survey found that Boomers surveyed have largely stayed the course and stuck to their plan, as only six percent of respondents who were impacted by the pandemic withdrew money from retirement accounts more due to COVID-19.

Making the shift from saving for retirement to living off of your savings is momentous – and can be a little scary, but if you want your portfolio to go the distance, it helps to have a written plan...

Though most Boomers say they either didn’t lose much of their retirement savings during the March 2020 market slide (37 percent) or that their portfolio has since recovered (27 percent), more than half (56 percent) are worried about future market volatility impacting their retirement plans—more than the presidential election (26 percent) and the ongoing pandemic (18 percent).

Written Plans Help Boomers’ Retirement Savings Go The Distance

Schwab’s survey found that Boomers laid the groundwork for financial preparedness early. A third (33 percent) of those surveyed began saving for retirement in their 20s, while 36 percent began in their 30s. Less than a quarter (21 percent) waited until their 40s, while smaller subsets waited until their 50s (seven percent), 60s (two percent) and 70s (one percent).

More than half (52 percent) of Boomers surveyed say COVID-19 has made them more focused on developing a clear financial plan for retirement. The sentiment is even stronger among aspiring retirees (63 percent).

But Boomers can do better when it comes to planning according to Schwab’s survey: only 37 percent have a written plan to help them achieve their financial goals in retirement. Far more (58 percent) say they’ve saved but haven’t put it in writing. Among those with a written retirement plan, a vast majority (65 percent) say their plan includes sources of income and when to draw upon them.

“Making the shift from saving for retirement to living off of your savings is momentous – and can be a little scary, but if you want your portfolio to go the distance, it helps to have a written plan,” said Williams. “That plan isn’t just a matter of selling a few assets and using the proceeds—you have to think about how your withdrawals will work with other sources of income such as dividends and Social Security, and consider how your tax situation may also change over time.”

 

 

 

About the Survey
The online survey was conducted by Logica Research, among 2,000 Americans aged 55 to 75 with at least $100,000 in investable assets. The study was conducted from August 20th to September 4th, 2020. Quotas were set so that the sample is as demographically representative as possible of that population. Detailed results can be found here.
About Charles Schwab
At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.
1Retirement savings includes assets in their 401(k), other workplace retirement accounts and Individual Retirement Accounts (IRAs)